Fees, fines, loans, scams: How the poor get poorer

BY MARY SCHMICH
CHICAGO TRIBUNE/TNS

A report issued by Community Organizing and Family Issues, “Stopping the Debt Spiral,” describes what makes it difficult for people to get out of debt and emerge from poverty.

Debt is a greedy beast.

Once it gets its fangs in you, it can devour you. It’s true for the rich. It’s far worse for the poor.

When we talk about poverty and its causes, we often ignore the role of debt, which is the subject of a report issued recently by Community Organizing and Family Issues, or COFI, a Chicago organization that trains and organizes low-income women of color.

Currency exchange fees, parking fines, overdue hospital bills, student loans, utility scams, predatory car loans. The report, called “Stopping the Debt Spiral,” describes the hazards of them all, using stories like the one Donna Carpenter tells.

Months without heat
Carpenter, who lives in Chicago’s Englewood neighborhood, recounts a plight too familiar in parts of Chicago.
“The year my gas was turned off, I went for months without a stove, no hot water, and no heat,” she says in the report.

“At the time, there were five of us living in the house — me and my four kids. My brother helped me pay off the bill and also the extra late fees. But just when I think I got it where it needs to be that gas bill shoots back up.”

Scams common
Her meager income makes it hard to pay in full, which leaves her vulnerable to the utility scams common in impoverished neighborhoods.

“In the past I signed up with people who knocked on my door to say I could get better rates with them,” she recounts. “They get your information and next thing you know, your bill is flying through the roof.”

Impact on jobs
The report also tells the tale of Rosalva Nava, whose husband, now her ex, stole the license plates off her car and racked up more than $6,000 in tickets and fines under her name.

When she was offered jobs at her children’s school, the process stalled — because the official application revealed she had debts with the city.

“People who have debt cannot get city licenses for jobs like barber or beautician or cab driver,” the report says. “Thus, city policy — which lacks accessible repayment plans — limits access to employment necessary for families to catch up. And often, parking ticket debt leads to driver’s license suspension — no way to get to the job if you find a job. Debt traps you in its spiral again.”

High interest rates
Another woman in the report described the plague of credit card interest rates.

“My husband is working at a shop,” she said, “but he has to buy his own materials and tools.

“We couldn’t afford to buy the tools outright so we had to get a credit card in order to buy his materials. But he needed the tools to do his job, and the only credit card he could get had extremely high interest rates.”
Nobody, rich or poor, likes to discuss debt. It often comes with shame, sadness and guilt. To help the survey respondents talk openly, COFI deployed parents from the communities they surveyed.

‘A grave mistrust’
Working with Loyola University’s Center for Urban Research and Learning, the parent-leaders held forums and went out into Chicago neighborhoods, as well as to the suburbs and downstate.

One of the leaders was Rosazlia Grillier, an Englewood resident who has had her own financial struggles.

“There’s a grave mistrust,” she said. “They felt more comfortable talking to people who aren’t going to look down on them because they’re in the same circumstances.”

Mostly Black, Hispanic
Most of the 304 people surveyed were women, almost all were Black or Hispanic. Fifty-eight percent had incomes of less than $15,000 a year.

While survey respondents with somewhat higher incomes had greater rates of credit card, car loan and mortgage debt, the poorest struggled more with utility bills and overdue parking and traffic tickets.

Why don’t they just pay their tickets and bills?

Someone reading this is bound to be asking that question. The answer is that when you live on next to nothing, food and housing come first, which leaves little to spare.

The report can be read at http://bit.ly/STOPReport.

Shedding light
The solution isn’t only in the hands of government, of course. COFI is also working with people on how to read their utility bills, how to save money and how to be their own advocates.

Poverty has many tangled causes, but when we debate them, we need to include the pernicious nature of debt.
Who should read the COFI report?

“Everybody,” Grillier said. “This sheds light on real people. There are real people behind these numbers. We should all be aware of one another.”

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