DC is not a source of solutions but of problems for the poor and minorities

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Making ends meet is much more difficult today than it was a year ago or before the pandemic.

Galloping inflation in 8.3% it forces Americans to work harder just to buy less. If you weren’t working for significant earnings to begin with, rising costs for essentials are robbing you of your quality of life and your ability to move up in America.

That’s why many Americans see celebrating the Inflation Reduction Act in the White House on Tuesday as an insult to their difficulties.

Misleadingly named bill won’t slow inflation like nonpartisan analysis confirms, but in the short term it may increase according to Penn Wharton Budget Model. Meanwhile, supermarket bills increased 13.5% in August from a year earlier, as food prices increased at a rate not seen in 43 years.

Americans need solutions to pay for groceries, haircuts, and home heating bills. Right now, Washington is not the source of solutions, but of problems, especially if they enact policies that restrict poor and minority Americans’ access to cash when they need it.

Many minorities, especially women, were building a better life for themselves and their families while working in low-paying jobs. Then a pandemic hit. He exposed how vulnerable the (minority) industries in which women tend to be concentrated (leisure and hospitality, human services and retail) were to prolonged closures and an uneven recovery.

Today there is 1.2 million Fewer jobs in leisure and hospitality than just before the pandemic started.

Two and a half years later, African-American and Hispanic families should be on their feet, but inflationary policies like President Biden’s American rescue plan forced down real profits 3.4% last month.

A recent NPR/Harvard poll indicates that due to inflation, African-Americans are much more likely than whites to report serious financial problems (55% to 38%), are more likely than whites to report not having enough emergency savings for a month of expenses (58% to 36%) and buy food (32% vs. 21%). Not surprisingly, more than half of nonwhite voters (54%) disapprove of the job the president is doing.

Many nonwhite families are unbanked and unable to access traditional sources of credit or bank loans for unexpected expenses. An estimate 5.4% of U.S. households (approximately 7.1 million) were unbanked in 2019. Non-Asian minority, low-income households, households with less education, young households, and households with disabled members tend to be more likely to be unbanked.

They rely on short-term installment loans (pejoratively known as payday loans) often to pay a bill until they receive their paychecks. These products often have nominally high annual percentage rate (APR) interest rates.

If not paid on time, loans can be very expensive. However, most borrowers pay back the initial amount borrowed within six months, according to research.

It’s common for those who claim to care about the poor to make fun of the short-term loan industry. Worse yet, lawmakers want to shut down these financial institutions by imposing arbitrary caps on interest rates. The Senate is considering a national interest rate cap of 36%.

The unintended, or perhaps intended, consequences of rate caps would be to prevent lenders from offering these loans. Higher interest rates reflect the risk of lending to someone with poor or no credit.

As a Role of the Federal Deposit Insurance Corporation (FDIC) It concluded, “Fixed operating costs and high loan loss rates account for much of the high APR charged on payday loans.” For the unbanked, these loans are a better option than more expensive and, frankly more dangerous, alternatives.

Surprisingly, now even the institutions we trust to weed out scammers and bad deals have focused on small loans. The Better Business Bureau (BBB) ​​published a new investigation report in payday loan scams.

Operating in the shadow of legitimate industry, people engage in fraudulent activities by taking advantage of vulnerable people.

The report is correct that fraud is illegal and should be prosecuted. Unfortunately, the BBB unfairly groups small lenders with fraudsters as if they were the same thing.

To be clear, most small dollar lenders do not earn an F rating from the BBB, and in minus half get an A. But BBB is promoting industry criticism and clinging to rate-cap proposals that would make it financially unsustainable to offer those loan services.

The result would be disastrous and leave vulnerable Americans worse off. When Georgia enacted a rate capborrowers bounced more checks, complained more about lenders and debt collectors, and were more likely to file for Chapter 7 bankruptcy.

Inflation isn’t going away, so helping unbanked Americans access resources to meet unexpected needs is critical. This is the message minorities want to hear from the president and national leaders.

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