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Religious ethics clash with loan practices

As easy money becomes the norm in the US, borrowing habits raise more ethical concerns.

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"If there be among you a poor man ... thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, in that which he wanteth" (Deuteronomy 15:7, 8).

That's the way the King James version of the Bible defines the morality of lending. But the ethics of lending is a problem older than the Bible - and one still struggling for resolution.

Democratic presidential nominee John Kerry has brought the issue to the forefront by proposing a sweeping ban on a series of "abusive" loan types that he says are costing consumers in the United States upwards of $9 billion a year. If passed by Congress, the Kerry plan would require lenders to print loan terms boldly in plain language; to end high prepayment penalties; and to curtail high-rate short-term lending that he says unfairly targets military families.

Given current levels of indebtedness in the US, some say it has never been more urgent for society as a whole to tackle questions about the ethics and legality of lending practices.

In 2003, the average US household with at least one credit card carried three times more credit-card debt ($9,205) than in 1990, according to analysts at CardWeb.com. Yet the nexus of contemporary lending trouble, according to the Center for Responsible Lending, is in mortgage rip-offs. Its analysis shows 2.1 million households give up more than $6 billion in home equity each year in financing deals that include high up-front fees, prepayment penalties on sub-prime loans, or financed insurance.

Predatory lending practices are another phase of the problem. "Payday" lenders extend $300 loans to people who struggle two weeks later to pay back the $350 that's then due, says Mark Pearce, executive vice president of the Center for Responsible Lending in Durham, N.C.

"We see people who have borrowed $300 and have paid $3,000 two years later in fees," says Mr. Pearce. "We think that's predatory lending because the intent of the product, the design of it, is to trap people in their most desperate moments."

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