Passionate, driven, determined, focused; these are just some of the words that describe The National Organization of Black Elected Legislative Women (NOBEL/Women). This organization is composed of current and former black female legislators that are determined to provide programs and policies to address the social justice and economic empowerment issues faced in black communities.
During NOBEL Women’s 32nd Annual Legislative Conference, these powerful women teamed up to discuss the impact of predatory lending and the lack of credit opportunities in the black community. Low-income households often need help to develop financial health. However, there are not many resources available.
One of the most diverse fintech companies in Silicon Valley, LendUp, is now servicing low-income families that need access to money.
The Payday Lender Problem
Traditionally, when individuals with low credit scores attempt to borrow money, they get denied. According to LendUp, there are actually 150 million people that do not have access to credit in this country, due to a lack of income or poor credit scores.
When borrowers run out of options, they often resort to payday lenders. Payday lenders are companies that continuously target repeat borrowers, while charging high fees and high-interest rates.
According to a study by The Pew Charitable Trusts, 12 million Americans receive $7.4 billion annually from payday lenders, and 12% of these borrowers are black. Of those borrowers, 69% of them use their loans to cover reoccurring expenses. This means that, unless borrowers can change their financial habits, they will continue needing payday loans.
With this being the only option, it is almost impossible for low-income communities to financially grow. “Someone with poor credit is going to pay over $250,000 in fees and interest over the course of their life,” said Jake Rosenberg, co-founder of LendUp.
Unfortunately, most financial products are structured in a way to allow the company to succeed, while the customer fails. However, LendUp offers multiple resources that help guide borrowers in a productive way.
The LendUp Ladder is a tool designed to help encourage responsible habits and give borrowers access to larger loans at lower interest rates over time. Instead of remaining in one place, the LendUp Ladder can help borrowers enhance their credit score. Borrowers can climb the financial ladder by making on-time payments and utilizing the various loans, which, in turn, can lead to access to short-term loans with lower interest rates, while also building credit over time.
The NOBEL Women organization is not only concerned about predatory lending; they’ve also expressed concern regarding the ability to trust lenders—and Rosenberg agrees.
“When looking to take out a loan or obtain a credit card, it is important to do your research,” he said.
Selecting a Quality Lender
To ensure that companies are not taking advantage of you, it is important to know how to select a lender.
Here are four key ways to know if you are choosing a good or bad lender:
1. Verify the Lender’s Legitimacy
Be sure your lender is licensed to do business in your state. There are a lot of predatory lenders that operate illegally.
2. Thoroughly Educate Yourself Before Settling on a Lender
Before selecting your lender, ask yourself, “Will I be better off in a year, if I use this product? What about in two years?” The company’s focus should be on financially helping you. If not, chances are, they are only looking to take advantage of you, capitalizing off of your lack of knowledge on the subject. So, don’t allow for it—do your research and arm yourself with knowledge.
3. Ask the Company’s About its Previous Customer Satisfaction Rates
Ask the company about their past customers, with questions like:
- “What has happened to your customers over time?”
- “Have your customers’ credit scores increased?”
- “Have your customers been paying less in fees?”
4. Know Your Rights: Learn the ‘The Key Three’
Before you select a lender, be sure to know the three key laws that protect you as a borrower:
- Equal Credit Opportunities Act
- Fair Credit Reporting Act
- Fair Debt Collection Practices Act
For more information about all three laws, check out the video below: