Scamming the Poor

Abstract Because of the difficulty in securing traditional forms of credit, the poor are often driven into the fringe economy for check cashing, bill paying and short-term loans. These services involve high user fees and exorbitant interest rates that rival or even exceed those for illegal loan sharking. Fringe lending businesses function as a legal and virtually unregulated form of predatory loan-sharking. They neither offer nor promote savings-based financial products that build assets and increase household wealth. The predictable outcome is the depletion of the income and assets of low-income families and communities. Because many poor clients are vulnerable to fringe market lenders, social workers need to understand this market to better assist the poor in finding and developing alternative forms of borrowing. This article will explore the rapidly growing fringe economy and examine strategies to help curb the drain of income and assets from low-income communities.