Making millions and billions off the working poor.
Businessweek’s Brian Grow and Keith Epstein did an in depth article on the corporations that prey upon our nations poor, specifically the working poor. The title of their article (listen to the podcast here): The Poverty Business. There is quite a lot of money to be made off this large group, don’t kid yourself. The working poor strive to get out of poverty, no one wants to be broke day after day…year after year. They seek to better their lot in life even though wages for this group in particular have been stagnant for years. That is where these corporations come into play. The Bill Moyers Journal this week was about this issue as well and interviewed the Businessweek writers.
They are known as Predatory Lenders. You see their ads; payday loans, buy a car with no or bad credit, subprime credit cards with well over 20% interest rates and finally the home loan corporations. In a Mother Jones writeup we can see how the subprime credit card industry is raking in the cash with the best wishes of major Civil Right Organizations such as the Southern Christian Leadership Conference and the National Urban League among others. Ironic? Oh hell yes, but more on that later.
The National Consumer Law Center has a report available on subprime credit card companies here (pdf). These credit card companies don’t offer credit as a means to ‘get ahead’, these cards are a means to provide the company with very lucrative income know as ‘Fee Harvesting”. A short excerpt:
The report, “Fee-Harvesters: Low-Credit, High-Cost Cards Bleed Consumers,” opens a window on a shadowy submarket where savvy card companies extract hundreds of millions of dollars in fees and other revenue from the pockets of consumers in the so-called subprime market. One of the fee-harvester cards featured in the NCLC report comes with a credit limit of $250. However, the consumer who signs up for this card will automatically incur a $95 program fee, a $29 account set-up fee, a $6 monthly participation fee, and a $48 annual fee – an instant debt of $178 and buying power of only $72.
Fee-harvesting is extremely lucrative for the industry. In 2006, Atlanta-based CompuCredit – one company featured in the NCLC report – collected $400 million in fees from a portfolio of fee-harvester cards that by mid-2007 had saddled cardholders with nearly $1 billion in debt. (emphasis mine)
The predators at CompuCredit also have their very own collection agency when the working poor fall behind in their payments. As the MotherJones article points out, the Federal Trade Commission has filed suit against the parent company:
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