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National Financial Awareness Network President John Janney expressed concerns over recent studies showing that minorities, women and low income workers are paying the price of credit card deregulation and that the student loan market is riddled with questionable relationships between lenders and school financial aid personnel.
An August 1 report published by research center Demos exposes the negative impact of deregulation on consumers. The report shows that even though the cost of funds decreased, banks continued to increase the interest and fees they charge consumers. For example, the highest APR rose from 11.88 percent in 1990 to 41 percent in 2004.
The impact of credit card deregulation hits the poor, minorities and women the hardest. Cardholders earning $25,000 are five times more likely to pay APRs over 20 percent than those who earn $100,000. Fifteen percent of African Americans and 13 percent of Latinos pay more than 20 percent APRs on their account balances, compared to seven percent of whites. Eleven percent of single women cardholders pay greater than 20 percent APRs, compared to six percent of single men. The study also found that these groups are more likely to miss payments.
“Credit card deregulation erased limits on the interest rates and fees that banks can charge consumers,” said Janney referring to the 1978 “Marquette” and 1996 “Smiley” Supreme Court decisions. “It gives banks unlimited power to charge consumers outrageous interest and fees, and banks use this power to punish consumers who are already hurting financially.”
Banks use credit scores to justify the higher interest rates, but banks are not alone in using this information to fatten their bottom line. A recent study by the Federal Trade Commission (FTC) confirmed consumer advocates’ suspicions that minorities pay higher automobile insurance rates, thanks to the insurance industry’s use of credit scores to set monthly premiums. Critics of this practice say that it hurts minorities, women and the poor. Furthermore, credit reports are often inaccurate, which causes credit scores to be erroneously low.
To add to these troubling trends, lenders are targeting aspiring college students with loans apparently designed to ensnare them into a life-long debt trap. The Government Accountability Office (GAO) recently released results from their investigation of unethical relationships between student loan lenders and college officials in which college financial aid personnel were motivated to steer students toward expensive, private student loans instead of federal grants or subsidized loans. Lenders provided bonuses and gifts in exchange for business, a deal which hurts struggling students already burdened by cuts in federal student aid programs and skyrocketing tuition.
Janney predicts that the demand for debt relief services and self-help guides will continue to grow as the housing market continues to spin into crisis, former college students experience the financial crunch of high-interest private student loans and our credit system continues to punish minorities, women and the poor.
“Offering American consumers relief through negotiated debt settlements is increasingly important to the health of our economy,” explained Janney. “Debt settlement is a way for consumers and creditors to meet halfway, helping consumers repay debts and creditors recoup losses.”
Janney said that anyone interested in learning more about debt settlement can read free articles from the NFAN website. NFAN also offers a Do-It-Yourself Debt Settlement Kit that provides audio and workbook instruction for people wanting to negotiation their own debt settlements. The kit and its support forum are located at DIYDebtSettlementKit.com.
About NFAN
The National Financial Awareness Network, Inc. (nfan.com), is a financial literacy company that offers educational products and services related to personal finance, such as the popular Do-It-Yourself Debt Settlement Kit. The New York State Banking Department lists NFAN’s website HelpForDebtors in their Financial Educational Resources Directory.
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jjanney[.]nfan.com 
