RALEIGH -- African-American communities across North Carolina recently reported receiving "robocalls" urging support for the Consumer Finance Act Amendments bill in the state legislature. The recorded message was from Americans for Prosperity and claimed that the bill will create jobs by increasing credit from "hometown lenders" to "small business and families." Unfortunately, there's nothing that could be further from the truth.
In these times of economic difficulty, working families are at greater risk of abuse by big banks and corporations. That includes abuse in the form of predatory lending and practices like charging excessive fees and jacking up interest rates. Interestingly, North Carolina has some of the strongest laws on the books against predatory lending, leaving us less at the whim of those looking for massive profits at our expense.
So of course big banks and their supporters are looking to change it. Americans for Prosperity, the group that sponsored the robocall supporting the bill, is funded by the billionaire Koch brothers who have been at the forefront of bankrolling a national pro-corporate CEO agenda at the expense of working people. And in North Carolina, the group is backed by the discount store owner Art Pope.
In reality, this bill would bleed our small businesses and families dry. The Center for Responsible Lending estimates that the bill will cost North Carolina working families $50 to $70 million annually in higher interest payments and tens of millions in new fees. Higher interest rates and more loan fees mean less money for small businesses to create jobs and less money for families.
Nor will the bill help North Carolina's so-called hometown lenders. According to the Center for Responsible Lending, two-thirds of these extra profits will go to CitiFinancial (owned by Citigroup) and American General (owned by AIG and the Fortress Investment Group). AIG and Citigroup are the same financial institutions that helped create the financial crisis that wrecked our economy in the first place.
The sad irony is that people like the African-American communities being targeted here are disproportionately impacted by predatory lending practices. According to a new study by the National Bureau of Economic Research, high-cost lending practices are more common in communities of color because 28 percent of African-Americans and 30 percent of Hispanics do not have access to traditional banks.
Our communities need access to affordable credit for consumers. Small businesses need access to affordable loans to grow and create jobs. But the finance act bill will make things worse by increasing the cost of loans. This bill is the opposite of progress. Our state senators must stand up for North Carolina's working families and stop this bill.
