Duke Law Professor Sara Sternberg Greene’s paper The Bootstrap Trap describes the tragic oppression of consumer credit on low-income households as people strive desperately to become secure and self-sufficient and the limited influence of poverty law. Professor Sternberg Greene, a practicing sociologist, evaluates the disturbing impact of credit scores on low-income consumers’ lives- that are also applicable to the middle class living paycheck-to-paycheck.
“…..respondents referred to their credit reports or scores as “the most important thing in my life, right now, well besides my babies,” as “that darned thing that is destroying my life,” and as “my ticket to good neighborhoods and good schools for my kids.” Many respondents believed that a “good” credit score was the key to financial stability.”-Greene
“One respondent, Maria, told a story about a friend who was able to improve his score. She said, “He figured out some way to get it up. Way up. I wish I knew what he did there, because I would do it. Because after that, everything was easy as pie for him. Got himself a better job, a better place to live, everything better.” Maria went to great lengths to try to improve her score so that she, too, could live a life where everything was “easy as pie.”- Greene
Greene states that a credit score has evolved into a metric of self-worth and value, and a precursor to success. It is true that a good credit score results in easier and more credit, but that credit must eventually be serviced and someday paid off.
It is inherently dangerous when you finally achieve credit worthiness because you are enticed into obtaining more and more credit that you should never have been approved for in the first place based on income and living costs. The illusion of a safety-net is deceptive.
Greene proposes a “Financial Services for Family Stability” program, modeled after Ireland’s Money Advice and Budgeting Service. The proposed FSFS program, would be funded by TANF block grants to help low-income families with financial advice planning, debt management services, crisis counseling, and potentially interest-free small loans (with eligibility gates and counseling requirements).
Greene understands the plan is imperfect but it is a place to begin when there is no broker in America who provides unbiased, honest, financial advice without an agenda to America’s low income citizens. The banks have taken full-advantage of people’s naivete, and manipulated the unsuspecting into missing payments or dead-end modifications to ensure a default.
Most people try to do the right thing and make efforts to pay what is owed but unpredictable life events like job loss, or illness are particularly devastating to those with limited resources. One missed paycheck can cause devastation to an entire family and the banks know it- and plan to swoop in and feed off the festering carcass of any asset they may have had. The banks know that most people are sitting ducks and just one missed payment can cascade into a loss of their home- and they take full advantage of any vulnerability.
Loan Modifications may be modern day redlining because minorities are especially vulnerable to bank tactics to create an arrearage and subsequent default. Low income people, and the middle class, should not be a barrel of carp for the banks to swoop down on and pluck out one by one.. “I’m from the government, and I’m here to help,” isn’t a line people want to hear, but when the alternative is “I service your loan and I’m here to help”, or “I’m from credit card bank X, and I’m here to help,” or “I’m from a debt settlement firm, and I’m here to help” or “We can give you a loan modification under HAMP”, then it sounds only relatively more appealing. This is an issue that must be confronted in DC before Wall Street decimates 80% of Americans who compose low income and middle class families.