May 14, 2007
Profiting from the Poor
Is it time to return to the ban on usury?
In recent years, a range of businesses have made financing more readily available to even the riskiest of borrowers. Greater access to credit has put cars, computers, credit cards, and even homes within reach for many more of the working poor. But this remaking of the marketplace for low-income consumers has a dark side: Innovative and zealous firms have lured unsophisticated shoppers by the hundreds of thousands into a thicket of debt from which many never emerge.
There may be money to be made lending to the poor. It may make business sense, though the recent sub-prime lending collapse shows the risks in lending to the poor. And it may allow the poor to buy things they couldn't otherwise afford. But is it right?