Thursday, September 13, 2007

104. American dream not for everyone

32 percent of African-American males, essentially one in three, will spend time in jail during their lives. It is one of those statistics that does not lie; one that makes you realize that there is a societal issue, beyond excuses and stereotypes, which needs to be addressed. Incarceration at such an alarming rate is a reflection of the quality of education, scope of opportunity and sense of value that exists within this culture. The problem is so intense and so costly- both financially and socially- that the blame can be found in every segment of American society. From political representation and socioeconomic influence to the number of positive role models, African-Americans are clearly handicapped in succeeding in American society. It is difficult to live the "American Dream," when, statistically, the odds as an African American, are such that you, your father, or your brother will spend time in jail (for comparison, 5.9% of white males will spend time in jail). As a society, the problem is unacceptable.

Is racism a factor? Consider the following report from the Drug Policy Alliance:

"Although African Americans comprise only 12.2 percent of the population and 13 percent of drug users, they make up 38 percent of those arrested for drug offenses and 59 percent of those convicted of drug offenses causing critics to call the war on drugs the "New Jim Crow." The higher arrest rates for African Americans and Latinos do not reflect a higher abuse rate in these communities but rather a law enforcement emphasis on inner city areas where drug use and sales are more likely to take place in open-air drug markets where treatment resources are scarce."

Certainly, as this research might indicate, racism is still a factor, but I do not think that it tells the whole story. The story includes a reflection of history, opportunity and the current culture.

I recently visited the National Underground Railroad Freedom Center in Cincinnati. The museum detailed both the drudgery and immorality of slavery, and the path to freedom. African-American history is difficult to completely comprehend, as the details are nearly unbearable to consider. The center had a slave pen, which was used as a holding cell in the transportation of slaves to auction blocks.

Slavery, for white Americans, was as much an economic institute as it was a racist issue. In addition to the slave labor which made plantation owners wealthy, the slave trade was a very profitable industry. The slave pen was owned by Captain John Anderson, who kept detailed financial records of the slaves that were purchased and sold. In today's money, he made around $800,000 per year selling men, women and children into slavery. The men were chained to the second floor of the building until the market conditions dictated the walk to Mississippi or Louisiana. The journey was made shoeless across the treacherous terrain with their hands and feet in shackles.

Unfortunately the journey out of slavery, and shackles, now leads to prison bars for many African-Americans. Racism is a factor, but so are opportunity and aspiration. One of the museum tour guides, who was engaged with a young African-American group, emphasized the need for responsibility. He outlined the road to success, emphatically suggesting that goals and expectations include educational achievement such as Harvard Law School or an MBA from the Wharton School of Business.

Opportunity needs to include a well-funded high school education and preparation for secondary education. Families need decent wages, fair hiring and promotions, and continuous employment. They also need financial literacy and to delay starting a family until there is a measure of financial security. Finally there needs to be pride and respect within their neighborhoods. African-American role models must communicate realistic goals and proven methods for success. To simply say that "anything is possible" is misleading when everyone wants to be a professional athlete or entertainer. The message should be to follow your dream, but have a backup plan or two. The path may be difficult, and one can accept that challenge by being prepared "for anything."

Society and African-American culture are both equally responsible for creating and taking advantage of the opportunities afforded to all Americans. Aspiration and opportunity must converge at a point that furthers the economic and social advancement of African-Americans. If nearly one-third of any demographic is going to prison, then there needs to be an assessment of both that population, and the society in which it dwells. The emancipation proclamation did not free all the slaves (the Thirteenth Amendment did), and it certainly did not create all people equal. The racism that ensued denied equal rights and opportunity to African-Americans until, essentially, the Civil Rights Act of 1964. However, even today, freedom is a struggle.

It is time to move forward toward a complete and fair assimilation. We need to understand the problem and work ourselves backward toward a solution. Because, ultimately, it is not an African-American problem, it is an American problem.

Thursday, September 6, 2007

102. Payday lending

Payday lending has been termed a monster, an addiction and a black hole. Among a number of personal testaments, "Gail" from Columbus claims that it was indeed, "like a monster," and "it consumed me." Her $300 loan took her two years and $2100 to completely pay off- after she fell victim to what often becomes an endless cycle of borrowing and repaying small short term "payday" loans at outlandish interest rates.

Others have deemed it legalized loan sharking. And when it comes to making a dollar and exploiting the poor, there are few legal loopholes left unexplored. Unfortunately, payday lenders are exempt from the Ohio Small Loan Act, which caps interest rates at 28 percent. However, with annual interest rates that approach 400 percent, the endeavor appears to be more like thievery, and a lack of morality, than anything else.

378,000 Ohio borrowers have paid more than 209 million dollars in fees, and the average borrower has between eight and thirteen loans per year. Consumers fall into a destructive cycle from which it is difficult to emerge. One commentator, in response to the argument that payday lenders help people meet short term financial needs, felt the type of help they offered was equivalent to throwing a concrete brick to someone who is drowning. It is not difficult to understand that someone who cannot afford $500 this week will have difficulty affording $575 next week (the typical interest rate consists of charging $15 for every $100 borrowed). Consumers will often pay off that loan by borrowing money from a different payday lender.

The debt trap consists of both the continuous cycle of borrowing, and often ends up in a situation in which borrowers owe numerous lending stores at one time. Critics fail to recognize that when someone needs money- money to pay their rent, purchase their prescriptions or, perhaps, put food on the table- that they will inevitably do whatever it takes. Such desperation includes stealing, selling drugs and agreeing to unreasonable loans. These decisions often become disastrous leading to further financial difficulties, or worse.

Hardly anyone has not noticed the influx of check cashing and pay day loan establishments upon our towns and cities. They have invaded 86 of Ohio's 88 counties. To put the number of payday lenders in perspective, there are more pay day lending stores in Ohio than all of the McDonalds', Burger Kings and Wendys' combined.

I have friends who I bet would argue that if people are not responsible enough to make better financial decisions, then they get what they deserve. And, of course, I am not naive enough not to realize that some people are making horrible financial decisions for lifestyle or addiction- taking a pay day loan to buy a new television, go a short trip or even to purchase drugs. In these cases, there is less sympathy, although education or treatment might be a more pertinent remedy. Either way, at nearly 400 percent interest, there is an unreasonable amount of detriment inflicted on others.

There is hope, as legislators are considering putting a 36 percent interest cap on small loans. Even better, eleven states have made them illegal to operate altogether. Reformers (In a Policy Matters Report, "Trapped in Debt") have proposed the following recommendations:

  • Immediate protection from abusive tactics and practices
  • Reasonable and Transparent Costs
  • Legal Protection for Consumers
  • Time to provided and set up financial products at bank branches and credit unions, such as:
  • Check Cashing service at a very low interest
  • Assistance in opening checking accounts
  • Free financial literacy classes
  • Offering small loans that can be paid over time

The Ohio Coalition for Responsible Lending has led a campaign to end abusive lending, support reforms that provide reasonable costs, ensure fair and just lending practices for all Ohioans and, perhaps most importantly, encourage lawmakers to reconsider the exception of payday lenders in the Ohio Small Loan Act. People should contact their local and state legislatures to encourage reform. In addition, the Ohio Coalition for Responsible Lending has a hotline where people can call if they need help managing a repayment plan or if they want to share their experience with payday lenders.

There must come a time when our society stands up to those that abuse the poor for personal financial gain. And, in addition to legislation that makes it more difficult for those that take advantage of others, we need to encourage financial literacy. Predatory lending is a significant social ill, whether it is high interest credit cards, payday lending, or dangerous mortgage loans that have led to the housing crisis in Northeast Ohio. It is through both legislation and education that the protection that consumers need and deserve will be realized.