Horizons Community Blog (Colville, WA)

By Terry Elders When the Colville Lions Club disbanded, Colville Horizons voted to take over the community calendar project that it previously had sponsored. The community calendar, based on a school year, September through August, carries display ads and lists birthday, anniversary and memorial dates.

This project is a fundraiser for Colville Horizons which sponsors many local activities aimed at moving this community towards prosperity. Among these are the Your Big Idea Contest, the IEL Career Closet, and Northeast Washington Business Development Services. The group also promotes early and adult literacy, supports a mentoring program, and will soon maintain a volunteer bank database.

The calendar will hang vertically and measure 11” by 17”. Each page will carry a different photo of a Colville scene or Horizons activity. Display ads will remain the same from month to month, so businesses will have their ads in front of residents for the entire year, September through August.

Businesses interested in display ads should contact Scott Douglas, (509) 684-4712 or e-mail him at colvillehorizons@gmail.com. Because space is limited, ads will be accepted on a first come/first served basis.

Individuals or groups wishing to list events, birthdates, anniversaries or memorial dates, should contact Muriel Meyer at (509) 675-2974 or email her at colvillehorizons@gmail.com.

Calendars and individual listings can be ordered as well at Happy’s Hallmark Shop, 173 S. Main Street, Colville.

The deadline for ads and listings is June 15. Calendars will be delivered in August.

By Terri Elders

If you’ve been reading this series so far, you might guess that in the past few weeks I’ve immersed myself in researching theories about why the poor in rural America stay, uh… poor. I’ve even thought about that question raised in that old song: “There's nothing surer, the rich get rich and the poor get children. In the meantime, in between time, ain't we got fun?”

Well, I’ve got an answer now, and in a word, it’s “no.” It’s not fun now, nor has it ever been. Not even in Victorian England when entire families went to debtor’s prisons. Just read Charles Dickens’ Little Dorrit, where people who owed money were imprisoned and unable to work, until they repaid their debts. And even today analysts allude to the practices that keep the poor in debt in the United States as 21st century credit slavery.

Full disclosure: I’m neither an economist nor a financial consultant. Sure, I can file my own income taxes, but that’s about it. I’ve been a teacher, a social worker, a writer, a consultant. I’ve worked with economically disadvantaged people all my professional life, both in the United States and in dozens of developing countries with the Peace Corps. But until last month I had never even heard of car title loans, let alone refund anticipation loans. True confession…I’ve been clueless.

I’ve considered so many theories. Theoretically, I’ve been told, in the United States poverty is related to lacks: lack of education, lack of opportunity, lack of social justice, lack of ambition, lack of this, that and the other. Never though, had I suspected that predatory lending traps might make a significant contribution in keeping the poor ever deeper in debt.

Some say it’s the food chain…those above feed on those below. Others claim it’s simply how capitalism works. More point out that prey and preyers are distinguished by where eyes are positioned. We consumers have to be reminded to keep our eyes positioned straight ahead. We’re not prey. This is so important to remember: eyes open, look around, to the front and to the sides, to see what might be going on.

When I attended the Rural Families Economic Success conference in November, as part of the Colville Horizons RuFES group, I learned about the Nasty Nine. I learned about how so many legal, but vicious, practices do more than just prevent the poor from climbing upwards. In recent times, they’ve nudged the middle class down the slippery slope, as well.

Another confession: I’ve become increasingly aware of aggressive solicitation by lenders. They’re pretty pushy people. Though telemarketers no longer can phone you up at supper time, thanks to the Federal Communication’s “no call” rule, lenders still have the Internet, the US mail, flyers and advertisements, as media to deliver their similar pitches.

These are their messages:

• We can lower your monthly mortgage payments.


• We will save you hundreds each month by consolidating your credit card and other payments.


• You can use your equity to buy that new (car, boat, kitchen, dream vacation - take your pick).


• You can save your home from foreclosure; refinance your way out of bankruptcy.

Think twice before responding to these solicitations.

In earlier articles we looked at the first six of the Nasty Nines. This week let’s take a look at the final three of these mostly legal, but extraordinarily costly, services that consumers should avoid.

Sub-Prime Mortgage Loans

The first, and maybe the most nefarious of the lot, is sub-prime predatory lending, that, according to many reports, has likely has stripped more wealth out of low-income rural families than all of the other eight combined.

Though these loans, offered at higher interest rates due to additional credit risk, have a useful role by allowing low-income families to share in the American dream of home ownership, they can become predatory when they:

• Steer qualifying borrowers away from a conventional loan.


• Load up with excessive points, fees, or insurance.


• Assess high prepayment penalties, a huge problem in rural areas.


• Involve “flipping,” (frequent refinancing to extract fees).


• Include “yield spread premium” kickbacks to brokers.


• Steer smaller loans of rural and low-income families to sub-prime subsidiaries.

Estimates of the amounts that low-income families lose through practices such as these run into billions per year, and substantially increase the likelihood of default. Surprisingly, in 2006 the Wall Street Journal reported that over 60% of all borrowers receiving these mortgages had credit scores high enough to quality for prime conventional loans.

Possible Solutions:

The best way to avoid a lender’s scam is not to accept the first offer you obtain, and to request quotes from several lenders.

If possible, work with a reputable mortgage broker. Brokers have dealings with various trustworthy subprime lenders.

Visit with local banks and lenders to learn about other options.

Title Loans

Car title loans are one of the fastest growing and least regulated forms of high-cost lending, particularly in rural areas where most low-income families own automobiles because public transportation simply doesn’t exist. Such loans are short-term (30) day loans secured by a car title which is held by the lender.

In Washington State, such loans are illegal, but they are available online. On their websites, potential lenders ask you to punch in your zip code to learn where the nearest store is. If you punch in the Colville zip code, 99114, it provides the address of the nearest store, in Coeur d’Alene, a scant 80 miles away.

The lender promises loan anywhere between $300 to $10,000, and that credit ratings never would be checked. It boasts it has a 98% success rate, whatever that might mean.

According to Aspen Institute, typically these lenders:

• Typically charge 25% per month (300% APR).


• Can cost you up to ten times that of even a high-risk car purchase loan.


• Hold the keys and repossess immediately upon a missed payment.

Possible Solutions:

• Pay attention to the APR. Borrowers can end up taking loan after loan end an endless cycle of debt.


• Shop around. Go to local banks and credit unions to check out any alternatives.


• Swallow your pride and ask family and friends for help first.


• Keep a rainy day savings account.


• Avoid forced arbitration clauses, if a car title loan is the only option.

Credit Cards

Finally, there’s some good news regarding predatory lender practices. Several of the worst credit card company practices will be partially or totally banned by Federal Reserve or Congress, effective 1/1/2010 or 7/1/2010. These include universal default, two-cycle billing, payment order manipulation, retroactive penalties and fee harvesting cards.

Credit cards can be a convenience, but according to the American Bankers’ Association, the average family today carries $8,000 in credit card debt. Think of what interest that much money could draw if it were in a savings account.

Possible Solutions:

• Monitor how much you charge in relation to your credit limit. If you charge more than 30% to 50% of your limit, your credit score could go down.


• Browse the reports section of CardRatings.com to shop for every kind of credit card.


• Know your interest rate.


• Read the fine print, and compare charges and fees.


• Pay the balance in full.


• Limit the number of cards you use to two.


• If possible, set aside 5% to 10% of your income after needed expenses to be distributed among retirement accounts, short term savings and an emergency account

21st Century Credit Slavery

To recap, the Nasty Nine include:

• Check Cashing


• Buy Here/Pay Here Car Dealers


• Courtesy Overdraft Loans


• Payday Loans


• Refund Anticipation Loans


• Rent-to-Own


• Sub-Prime Mortgage Loans


• Title Loans


• Credit Cards

The result of these predatory practices is that more than one in four low-income families pay more than forty percent of their income to service debt. Moreover, new bankruptcy laws now make it impossible to escape some debt.

How to Find Help

According to the Northwest Area Foundation’s 2009 survey in Washington State, 45% of Washingtonians do not know where they could go in their community if they needed help with basic necessities. Nearly half are unfamiliar with government services in their communities, such as temporary housing assistance and food stamps.

In the next few months, the Colville Horizons Board and the Colville RuFES team will be working together to identify ways to involve the community in Earn It, Keep It and Grow It. Interested? Take a look at the video, Living With a Hole in Your Pocket, on the Horizons Community blog, http://www.colvillewa.org/.

Next Week: Asset building by using such tools as tax credits.

By Terri Elders

“Another day older and deeper in debt,” for many signifies a reality of life, not just the lyrics of an old Tennessee Ernie song. As Christmas nears, I just heard on the NBC news that thirteen and a half million people in the United States are still paying off bills from last Christmas. Worse, I learn, more of us shortly will consider borrowing money we’ll never really be able to pay back, to buy Christmas gifts we can’t really afford.

It’s not as if we Americans are intrinsically greedy. It’s just that temptation lurks in our mail boxes in the form of catalogs, on our television with its incessant commercials hawking the latest “in” toys, and, of course, in seductive store window displays in every mall and on every Main Street. It’s tough to say “no.”

Since nobody other than our mothers might be willing to front us an interest-free loan, where do we go if we decide we can’t bear to watch the New Year’s football games on anything other than a new plasma television? The Aspen Institute has identified payday loans, refund anticipation loans and rent-to-own as three predatory lending practices it calls its Nasty Nine.

Payday Loans

The $125 billion a year industry has more retail locations than McDonalds, Burger King, Wal-Mart, Target, Sears and J.C. Penney combined, counting pawnshops, tax refund lenders and rent-to-own stores. But no storefront is needed. Internet and telephone operations avoid state laws and limits, and are accessible in rural areas. Just Google “payday loans” and 1,490,000 results show up. Most sites promise up to $1500 within hours, no credit check necessary.
Payday loans, usually secured by a post-dated check, might seem like a quick solution to a temporary cash shortage, but are a dangerous consumer rip-off. Who uses these services? Payday lenders target younger consumers with a limited understanding of finances, people who are deeply in debt and struggling to meet their basic financial obligations, and those who have a history of using high-risk lenders.

Payday loans are deceptive. Since you're forced to turn over a postdated check, you may be harassed, threatened, or subjected to collection practices. The payday lender may deposit the check before the date you agreed on, causing your check to bounce and forcing you to pay more fees. Because people who use payday lenders are usually in desperate financial situations already, they may have trouble repaying the original loan and they continue to extend it until they've paid more in fees than the amount of their original loan.
The US Federal Trade Commission recommends avoiding payday lenders. Here’s why payday loans make Aspen Institute’s Nasty Nine:

• Typical cost = 650% to 780% APR.
• $500 for two weeks typically costs $$625 to repay.
• Average customer rolls loan over eight times, paying twice the original loan in interest.
• $500 rolled over for one year costs up to $3,900.

Possible Solutions:

• Make changes in your spending plans to avoid overspending.
• Find ways to increase your income.
• Contact a local credit union for a small loan.
• Ask for a pay advance from your employer.
• Consider a loan from family or friends and get the terms of the loan in writing.
• Use a credit card advance.
• Request additional time to pay the bill from your creditors instead of taking a payday loan.
• Seek credit counseling.

Plan ahead to prevent financial emergencies.

Refund Anticipation Loans

On the surface, refund anticipation loans (RALs) might seem like a great deal. Used mostly by low and moderate income consumers, these loans are extremely high-cost bank loans secured by the taxpayer’s expected refund, loans that last a week or two until the actual IRS refund repays the loan.

Even without the costly loan, most taxpayers could have their refund in two weeks or less. RALs are aggressively marketed by income-tax preparation companies. These firms advertise "Instant Refunds" or "Quick Cash" for their customers who need money in a hurry. They disguise the fact that they are selling advance loans on anticipated tax refunds.

People whose income is low enough to qualify for the Earned Income Tax Credit are guaranteed a refund if they file. So tax preparation firms, for a fee, file the taxes and pay out a refund immediately, as a loan secured by the expected IRS check.

Here is why RALs are in the Nasty Nine, according to Aspen Institute. The government finally has found a way to reward people who work hard for less money with a tax credit. And predatory lenders have figured out how to get that money out of workers’ pockets, plus more.

Here’s why they’re in the Nasty Nine:

• 235% APR to get refunds a short time sooner.
• Often coupled with exorbitant tax preparation fees for simple returns.
• Marketed as instant refunds, not loans that must be repaid if the return is rejected.
• Cost poor families $900 million in 20006 plus $90 million in “document processing fees.”
• Target poor rural communities, towns near military bases, Indian reservations, and minority communities.

Possible Solutions:

• Try filing your own taxes, using Internet resources such as About.com: Tax Planning:US
• Use free tax preparation services if you qualify.
• Open a checking or savings account and your refund will be deposited within 10 days, sometimes sooner.

Rent to Own

In this current economic downturn, one industry that’s booming is rent-to-own. Aaron's, the second-largest retailer in the $6.3 billion industry, has announced plans to open 200 stores in 2010, following an 18% increase in same-store sales last year.

Rent-to-own stores provide what looks like an attractive option. Consumers can lease electronics, appliances and other household items by the week or month. Payments can be applied toward a purchase. But critics say the industry has taken advantage of vulnerable customers for years by making rental payments so high that a product's ultimate purchase price is exorbitant. Interest rates and fees can equal 100% to 300%.

Last year, New York’s Sen. Chuck Schumer called rent-to-own companies "one of the most despicable industries around" and cited a typical transaction. Schumer's staff found a 37-inch television offered at Rent-A-Center for 104 weekly rental payments of $31.99 each - a total of $3,326.96. The same model could be purchased outright at Best Buy for $850.

Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group, though, says rent-to-own should be avoided. “The math just does not add up,” he says. “People should…look and see if in fact they can get a better deal somewhere else.”

This past July Washington State’s Attorney General’s Consumer Protection Division filed claims against Rent-A-Center, asking King County Superior Court to declare its collection practices and rental contracts in violation of the state’s Consumer Protection Act and Lease-Purchase Agreements Act. According to a press release on the AG’s website, this rent-to-own company allegedly had been:

• Harassing consumers with repeated telephone calls at home and at work after being told not to and filling a consumer’s answering service to capacity with collection messages;
• Making repeated collection calls to third parties such as family members or friends of the consumers, and disclosing the existence of the purported debt to third parties, and continuing such calls after being told not to;
• Using profanity and other abusive, threatening or humiliating language, including calling consumers “deadbeat,” “liar,” “thief,” and “ghetto trash”;
• Revealing consumer’s personal information to third parties in the course of attempting to collect debts;
• Using false threats of criminal arrest or other legal action, including telling children who are home alone that their parents will face legal action;
• Pounding aggressively on the doors of consumers’ homes even when the consumer clearly asked them to leave, shouting at consumers from outside of their homes, walking around the house and peering in windows when consumers refused to answer the door;
• Claiming to have a court order to serve when they do not;
• Making payment demands to babysitters or other third parties when the consumer is not in the home; and
• Going to consumers’ place of employment to demand payments and remaining even when asked to leave.

Possible Solutions:

• Comparison shop and use the low cost financing available through appliance and furniture stores.
• Work to improve your credit history to qualify for standard financing.
• Frequent local secondhand stores and charity shops that sell gently used furniture and appliances.

Next week: Sub-Prime Mortgage Loans, Title Loans, and Credit Cards.

This is a video that illustrates the problem that Terri has been writing about.

(Part 2 in a Series)

By Terri Elders

The Aspen Institute Community Strategies Group has identified The Nasty Nine, “a fistful of predatory lending traps that strip cash from hard-working rural families.” These include such practices as check cashing services, buy here/pay here car dealers and “courtesy” overdraft loans.

Until I attended the November training at Cedarbrook Conference Center at SeaTac, with the Colville RuFES team, I assumed most working folks had bank accounts. Then I learned that approximately 28 million people in America have no formal relationship with a mainstream financial institution. That’s right. An estimated one in four low-income families has no checking or savings accounts, nor credit union memberships. So how do they pay bills and cash payroll checks and IRS refunds?

Convenient but Costly Check Cashing

I initially was surprised that leading the list of these nine legal but costly services is check cashing. For most, a bank account is the first step on the road to financial security. I remember feeling grown-up when I finally got my first bank account and wrote my first check. So when I think of people who might not have bank accounts, I think of recent immigrants, college students, or the working poor who hold down two or three jobs to make ends meet.

Today, though, some middle class people have been divorced by their banks. Maybe they once had a checking account, but became overdrawn and could not pay the overdraft fees. Perhaps they earned just enough to cover basic expenses, then got hit with an unexpected emergency, such as tow truck charges when their car got stuck in the snow, or a substantial co-pay for a prescription. These unanticipated events could lead to another overdraft, which in turn could get them blacklisted on the Chex Systems, which is the credit bureau for bank accounts that are overdrawn. Many banks will not open accounts for people who are on this list, which can disenfranchise them for years.

Then there are those, like my Grandpa Louie, whose family lost money in the bank crash of l929, who avoided banks for a lifetime. My family always suspected he stored his cash in cigar boxes in his garage, where of course, it did not draw interest. My late husband, who worked in the gaming industry, where a large percentage of income comes from tips, told me that many of his colleagues in the card rooms confided they were strictly “cash and carry,” and didn’t trust banks.

People unable or unwilling to open a traditional checking account often feel that check cashers are their only option. Many remain open outside regular bank hours, and for some it might be worth the fee on occasion to have immediate access for funds.

But for others who routinely cash checks at a premium, and pay bills in cash or with money orders, and who draw no interest on whatever sayings they accrue, billions of dollars of assts are lost. Amazingly, a recent Brookings Institute study shows that American low-income households without bank accounts spend at least $4 billion on check-cashing and bill-payment services annually.

If check-cashing fees were deposited into a savings account, they could provide the foundation for asset development and goals, such as home ownership, small businesses, and education. By providing a cushion for the unexpected, a savings account can also eliminate the necessity of relying on payday lenders in an emergency.

“Over a lifetime, the average full-time, unbanked worker will spend more than $40,000 just to turn his or her salary into cash,” wrote former President Bill Clinton, a Democrat, and California Governor Arnold Schwarzenegger, a Republican, in a Jan. 24, 2008, Wall Street Journal column on the plight of those living outside the financial mainstream.

Aspen Institute additionally points out many check-cashing services serve as gateways to other predatory transactions such as payday lending.

Possible Solutions:

• Avoid services charging 3% to 7% of check’s face value.
• Find a low-cost checking account or share draft account at a credit union. A good account will be free, with no charges on checks, withdrawals, fund transfers or monthly statements.
• Open a small savings account, and contribute to it regularly.

Buy Here/Pay Here Car Dealers

When I returned after a decade of service overseas with the Peace Corps, I relocated to Little Rock, AR. I had yet to reestablish credit in the US, so bought a ten-year-old Geo Storm from such a dealer. I failed to have it checked by an independent mechanic, and subsequently within a few months spent twice the cost of the vehicle on repairs. Rushed, I simply had not thought it through and fell prey. Fortunately, I had cash reserves to cover the cost of repairs. But many do not.

No credit/Poor credit auto dealers take advantage of those desperate to get a car to drive to work, take the kids to school and for medical visits and shopping. Those living in rural areas where there is no public transportation are particularly vulnerable.

These dealers buy the cheapest cars available at auto auctions and sell them for up to 100% more than they are worth, with high interest/long term financing. Sometimes the down payment the purchaser makes completely covers the dealer’s total investment in the vehicle. Interest rates may begin at 25% APR, and even run much higher. Customers may pay for the car several times over, unlike a conventional car loan.

What is really nefarious is that dealers keep a spare set of keys and repossess the vehicle the night after a payment is missed. Aspen claims the average car is repossessed and resold five times annually.

Possible Solutions:

• Consider mileage and the year of the vehicle. Look for something less than 7 years old, with mileage less than 100,000 miles. Such a car will have 5 to 7 good years of drivability left.
• Find a dealer who can arrange bank financing.
• Find someone to co-sign, if credit is poor.

Consider mileage and the year of the vehicle. Look for something less than 7 years old, with mileage less than 100,000 miles. Such a car will have 5 to 7 good years of drivability left.
Have the vehicle checked out by an independent mechanic.

Courtesy Overdraft Loans

It might sound good at first, an automatic “loan” to honor checks, ATM withdrawals and cash-card transactions. But overdrafts pay off for the banks, not the consumers. When consumers allow an overdraft, it increases the probability of subsequent fees, because consumers have less money to cover other transactions. Subsequently, those with less end up paying more.

Just a few months ago, at the time of my husband’s death, I wrote some checks which I thought would clear the day my SSA direct deposit would be posted. To my surprise, I got hit with a $35 courtesy overdraft. Somehow my mortgage payment check got deducted from my balance before the SSA deposit got credited. At the time, I thought it just a coincidence. Now I am not so certain.

According to Aspen Institute, some banks routinely process courtesy-loan customers’ deposits last, and checks in largest-to-smallest order to maximize customer fees. In 2007 banks charged at least $17.5 billion to issue $15.8 billion in overdraft loans.

Households hit hardest by overdrafts pay an average of $1,374 a year in fees, estimates G. Michael Flores, founder of Bretton Woods, a management advisory firm that works with financial institutions. If consumers overdraw on a $20 debit card transaction, are charged the median fee of $27 and repay the credit in two weeks, they're effectively paying a 3,520% APR, according to the Federal Deposit Insurance Corporation.

President Obama signed legislation this past May limiting certain credit card practices, including rate increases on existing debt. Meanwhile, the Federal Reserve is examining the fairness of certain overdraft practices.

Possible Solutions:

• Read the fine print when opening a checking account with this type of service.
• Create a checking reserve to avoid overdrafts.

Next week: Payday loans, refund anticipation loans and rent-to-own.

As requested, here is the presentation that Elliott Edwards gave at the "Pathways to Prosperity" conference.

Nearly fifty people, from Deer Park to Republic, gathered at the IEL in Colville on Saturday, November 14, to network with local experts on setting up businesses.

Colville softwares developer Elliott Edwards of Hachisoft kicked off the all-day event with a presentation, "Partly Cloudy with a Chance of Open Source," introducing participants to a wide array of technology systems, some free and low cost. "We didn't know what we didn't know," one attendee remarked.

Noon keynoter, Heather Ruskievicz, who built Colville's Heather's Fairy Tale Bakery, told an inspirational story of how her son's military death both enabled and empowered her to open her bakery, wanting it to become a treasured place for the community children and their parents.

Debra Kollock, director of Stevens County WSU Extension, and Donna Jo Smith, manager of the IEL, discussed how their educational institutions can help entrepreneurs with needed training.

Dana McDowell of Rural Resources Community Action and WorkSource, discussed the history of the "Your Big Idea" contest, and described how local inventors can win a scholarship through Horizons to have their product idea evaluated by the WSU Innovation Assessment Team in Pullman. McDowell has packets available and can be contacted at 509-685-6158 or tollfree 1-800-766-2178.

Tri-County Economic Developement director Leslie Jones told the group how TEDD can help finance a new or existing entrepreneur, while Betty Buckley of Stonesoup, talked about Internet marketing opportunities through the website: Shop the Frontier. Monica McMackin, Forestry Specialty Products, detailed how to set up a cooperative.

Rick Hanson, certified public accountant, discussed practical steps in starting a new business, and Elaine Clough described business website basics. Scott Douglas of SCORE and Sue Poe of Edward Jones presented on marketing and microlending.

For those who were just starting to think about taking the first steps but were hesitant, Terri Elders, LCSW, discussed how to surmount initial worries, and Muriel Meyer and Ann Van Dielen provided an exercise on determining entrepreneurial types.

Meyer will be teaching a three-session non-credit course in February and March at the IEL, Colville Center, with registration accepted after December 1. The course will cost $24, with $15 for the text. For more information, contact Donna Jo Smith, (509) 685-2120.

Colville Horizons address is P.O. Box 1048, Colville, WA, 99114. Its current activities are posted on its website, www.colvillewa.org. The next meeting is scheduled for Monday, December 7, at 4:30, Room 127 at the IEL, Colville Center, 985 S. Elm Street, Colville. The public is invited.

The above was written by Theresa Elders, Colville HORIZONS Board Member.