Despite an outcry by both victims as well as many legislators nationwide against the legalized loan sharking and outrageous interest rates charged by payday loan companies, their exploitation of America's working poor only continues. Part of this reason is the growth and political clout of the lobby efforts of the payday loan industry, who are gaining clout by contributions to both political parties, insulating them against regulation. The Community Financial Services Association, the main payday loan lobby, continues to grow in clout for example. The CFSA even runs TV ads that look like some sort of public service ads, but are really intended to prevent further government regulation of this mega-profit industry.
There is a real world interest rate gap among the poorest workers and higher income workers, that not only the payday loan industry exploits but the mainstream credit industry as well. For example a 16.8% interest rate gap exists on car loans among those earning less than $30,000 a year and those earning more than $90,000 a year. The living situation of the poorest of American workers only continues to worsen as well, with a decline from about $325 a week in wages for many lower income working families down to just $275 by 2003.
Credit card companies have different terms based on "risk", which means offering far worse credit terms to the working poor. Interest rates can top 24% on "higher risk" accounts compared to around 8-12% on lower "risk" accounts. Also, sharply lower credit limits as well annual fees of of $50-75 may be charged as well. One mentally ill man living on a disability check in Portland, Oregon has a credit card with only a $75 limit, high interest rates and an annual fee for example, which has to be one of the worst terms ever for a bank issued credit card.
The subprime home loan industry has victimized many poorer working persons hoping to own their first home, but instead left many only homeless with outrageous clauses in the contracts including "balloon payments" and other scam language. Earlier this year, former SAVED BY THE BELL comedy actor, Dustin Diamond nearly lost his home despite making all payments on time to a "balloon payment" clause due to his higher risk credit status because of huge medical bills due to a sick child he fathered.
Senator Christopher Dodd who heads the Senate Banking Committee has held some hearings on both credit cards and the subprime home loan industry. But whether any real action will result is yet to be seen. So far, some huge credit card companies such as Chase only offered an apology for some of their more outrageous actions, with little real reforms yet to be to realized to the consumer.
Note: Wizbang Blue is now closed and our authors have moved on. Paul Hooson can now be found at Wizbang Pop!. Please come see him there!