The Poverty Business

Everyone knows about the subprime mortgage breakdown.

What you may not know, because it is not on the front pages of the daily newspapers, is that the subprime mortgage industry is only a small part of the subprime lending business. An comprehensive article in Business Week examines this industry in detail.

The take-away:

Poor people are not suckers for credit risks they cannot afford. They are . . . well poor and hence vulnerable.

A single Mom who applies for a lousy eldercare job for $15K a year needs a car. No car, no interview. So she has to pay exorbitant interest rates in the subprime used car market.

Same for a disabled guy eking out a living working at home with a computer. The machine crashes and he needs another one right away. But he has no cash. He knows he will pay twice as much buying one on credit from a subprime electronics firm, but no one else will extend credit.

The poor don't necessarily need credit counseling. And laws demanding full disclosure of interest rates and total costs go only so far.

The poor need access to micro credit at fair rates. Otherwise the business of poverty, gouging the poor with usurious rates, will continue to flourish and the poor will get deeper and deeper into debt.