"New Loan Sharks" Making Big Profits
Source Michael Hoover
Date 03/07/21/00:01

July 2003


New issue of Southern Exposure looks into the burgeoning "poverty industry"
 of subprime home lenders, payday check-cashers and other financial
 institutions that take advantage of the economically vulnerable

DURHAM, N.C.? "Subprime" home lenders, payday check-cashers, pawnshops, and
 other financial businesses that target consumers made vulnerable by
 discrimination and financial need are no longer "fringe banking" * they are
 one of the fastest growing and most profitable sectors of Wall Street.
 That's the conclusion of a special issue of Southern Exposure released this

"The dramatic rise of predatory finance institutions doesn't make front-page
 news, but it's hitting millions of ordinary people where it hurts most, in
 the pocketbook," says Gary Ashwill, Southern Exposure managing editor. "This
 issue of Southern Exposure is one of the most comprehensive looks at how the
 new loan sharks gouge consumers * and how they get away with it."

The special edition, guest-edited by acclaimed journalist Michael Hudson,
 features four investigations into the fast-growing poverty industry:

*** "Banking on Misery: Citigroup, Wall Street, and the Fleecing of the
 South," by Michael Hudson, which shows how millions have been ensnared by
 "subprime" home lenders who target the neediest, most vulnerable consumers.
 Hudson uncovers the shady and exploitative practices at the heart of one of
 Citigroup's most lucrative affiliates, CitiFinancial.

*** "Perpetual Debt, Predatory Plastic," by Dr. Robert Manning, author of
 Credit Card Nation, reveals how credit card companies lock borrowers in a
 cycle of debt through exorbitant late fees and over-limit penalties.

*** "From Pawnshops to 'Financial Supermarkets'," by Mary Kane, a look at how
 fringe banking?payday lenders, check cashers, and pawnshops?have gained a
 foothold in the mainstream.

*** "Simple Courtesy," by Taylor Loyal, an investigation into how banks
 increasingly use overdraft fees to boost profits at customers' expense.

The special issue also features "Seven Signs of Predatory Lending," and other
 tools for consumers on how to know when they're being targeted by predatory
 lenders. The cover section ends with several inspiring stories of grassroots
 activists who have challenged the new loan sharks to win improvements for

According to Hudson, the marginal banking industry has expanded dramatically
 in the past decade. Subprime mortgage lending, for example, has grown more
 than 500 percent in just a few years, from $34 billion in 1994 to $213
 billion in 2002. Payday lenders?storefront operations that offer small loans
 at interest rates as high as 400 percent?have grown from an uncounted
 scattering in the mid-1990s to a 25,000-strong multitude today.

Some of corporate America's biggest names, including Citigroup, through its
 subsidiary CitiFinancial, a subprime mortgage lender, have pushed their way
 into the fringe market, using their capital and clout to sustain investor
 enthusiasm and legal sanction for unfair and unsavory practices. They've
 found a rich market in the South, where economic inequality, racial
 discrimination, weak consumer laws, and pliable regulators create a ripe
 atmosphere for abuse.

Southern Exposure, now in its 30th year, is published by the nonprofit
 Institute for Southern Studies. Southern Exposure's 1993 investigation into
 the newly-emerging predatory lending industry, "Poverty, Inc.," was a
 finalist for the National Magazine Award and winner of the John Hancock
 Award for Business Journalism.

Copies of the summer 2003 issue are available for $5 at or by writing to Southern Exposure, P.O. Box 531,
 Durham, NC 277702. Yearly subscriptions are $21.

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