Targeted Populations

Unfortunately, predatory lenders are known to target certain types of people.  Two of  AFFIL’s Principles of Fairness in Lending speak to this problem:  Justice states that "It is unjust to prey upon anyone, particularly on those who are vulnerable due to age, health, language, education or other socioeconomic circumstances," and Equality states that "We all must have equal access to appropriate and fair products and services regardless of race, gender, language, national origin, physical/mental well-being, education, lifestyle or socioeconomic status. All discriminatory lending practices must be abolished."

Groups who are targeted by predatory lenders include African Americans, Latinos, other minority groups, immigrants, older Americans and college students.

• Read about the impact of subprime and predatory lending on people of color

• Watch a video and read about college students and credit cards

The Impact Of Subprime And Predatory Lending On People of Color:  Twelve Facts

1. African-Americans and Latinos are at greater risk of receiving high-rate mortgage loans than white borrowers, even after controlling for legitimate risk factors.

2. Racial differences in mortgage lending increase as income increases.  Middle- and upper-income blacks are at least twice as likely as similar whites to receive high-cost loans in most metropolitan areas.

3. Over 70% of high-income African American borrowers in Boston received a high-cost mortgage loan in 2005.  High-income African Americans were therefore seven times as likely to receive a high-cost loan as high-income whites.

4. In 2006, 18.8% of loans made in predominantly minority neighborhoods were originated by high-risk lenders.  Only 5.3% of loans made in predominantly white neighborhoods were made by these lenders.

5. In Los Angeles in 2006, subprime lending was 9.5 times more common in minority neighborhoods than white neighborhoods.

6. Unregulated “yield spread premiums” create a financial incentive for mortgage brokers to steer minority borrowers into loans with higher interest rates than their credit record warrants.

7. Fewer than half (48.4%) of African-American households owned their own homes in 2003, compared with three-quarters (75.1%) of whites who owned.

8. Eighty-four percent of African American and 75% of Hispanics credit cardholders carry a credit card balance, compared to and 51% of whites.  This makes people of color more vulnerable to arbitrary interest rate increases and other industry profit-boosting tactics.

9. Studies consistently show that payday lending stores are concentrated in predominantly low-income neighborhoods with high populations of African-Americans and Hispanics.

10. In North Carolina, African-American neighborhoods have three times as many payday lending stores per capita as white neighborhoods.  This ratio holds when data are controlled for other factors, such as income and education.

11. African Americans pay higher rates for both new and used car loans.  A 2004 study showed that African-Americans paid a median interest rate of 7% for a new car, compared with 5% for white borrowers and 5.5% for Hispanic borrowers.

12. For used car loans, African-Americans paid a median interest rate of 9.5% and Latinos paid a median rate of 9%.  For whites, the median is 7.5%.

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College Students and Credit Cards

• Watch our funny video about credit card solicitations on campus!

• Facts and Stats

• Solutions

• Sources for More Information

• AFFIL’s Main Credit Card Page

College students often confront two types of loans during their time at school:  student loans and credit cards.  In both cases, the industry does its best to profit from this population.  Click here to read more about student loans.

As for credit cards, students are a favorite target of industry marketers.  

In a world where the adult credit card market is largely saturated, finding new customers is invaluable to credit card companies.  Students are solicited several times each week through flyers, on-line advertising, and on-campus marketers.  Credit card companies buy lists from schools to do direct mailings, and enter into lucrative contracts with schools for other access to students.  

This access might mean the school will include a promotional flier for a credit card as part of its orientation materials, it might allow the company to “table” on campus and solicit students during the beginning of the year, or it might offer co-branded cards with the school’s logo on them.  USA Today reports that by 2006, "each of the largest 10 colleges and universities — through their alumni or athletic associations — had partnered with a bank to issue co-branded credit cards to alumni and students, earning the colleges up to millions in annual fees."

"Tabling"—where companies set up tables on campus and entice students to sign up for cards by providing free trinkets—is a practice which has come under particular scrutiny.  Students are offered t-shirts, stuffed animal mascots of schools, candy, pizza, sandwiches, frisbees, and travel mugs, and even low cost airline tickets in exchange for their personal information and signature on a form.

Research has shown that students would prefer not to be the objects of such intense marketing by the industry, though they are also keen to have access to credit cards.  

The marketers have been successful, as the facts below show.

College Students and Credit Cards Facts and Stats

• In 2004, 76% of undergraduates had at least one credit card, with the average student carrying four credit cards at any one time.  By the time students reach their last year of college, 91% have a credit card.

• In a study by US PIRG, three of four students (76%) report stopping at on-campus tables to consider offers or apply for credit cards.

• In 2004, the average balance on undergraduate credit cards was $2,169.

• Seventy nine percent of college student cardholders do not pay off their balance in full each month, making them vulnerable to arbitrary rate increases and fees imposed by credit card companies.

• Eleven percent of college students make less than the minimum payment each month.

• Journalists and advocates have also speculated about the impact of credit card debt on career choices, as students with big credit card and student loan bills take on higher-paying but less meaningful work.

Solutions

• Students:  Student PIRGs around the country are working to reform credit card practices.  Read more about their "Truth About Credit" campaigns, and get ideas for your campus!

• Schools:  Some schools have banned credit card marketing on campus altogether, and some have adopted rules guiding how companies can solicit.

• States:  California, Oklahoma, Texas and 15 other states have passed laws which restrict the way college students may be marketed to on public campuses.

• The Federal Government:  Senator Dodd proposed legislation which would protect students from aggressive marketing.  However, this bill has not yet been seriously discussed in Congress.

More Information about College Students and Credit Cards

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