Flame-Broiled Shark




I

f
someone told you that a bunch of low-income people, most of them
African-American or Latino, most of them women, most of them elderly,
had been victimized by a predatory mortgage lender that stripped
them of much of their equity or of their entire homes, you might
not be surprised. But if I told you that these women and men had
gotten together and, after three years of work, brought the nation’s
largest high-cost lender to its knees, forced it to sell out to
a foreign company, and won back a half a billion dollars of what
had been taken from them—one of the largest consumer settlements
ever—you’d probably ask me what country this had happened
in. Surely it couldn’t have been in the United States of the
Second Gilded Age, the land of unbridled corporate power and radical
government activism on behalf of the rich and the greedy. 


Yet,
it was. These victims identified a problem and named it “predatory
lending” in the late 1990s. Their campaign to reform Household
International (also known as Household Finance and as Beneficial)
played out from 2001 to 2003, concluding with a settlement that
includes a ban on badmouthing the company. That’s why more
people haven’t heard about this. The families who fought back
and defeated Household are barred from bragging about it or teaching
the lessons they learned, because that would require recounting
the damage that Household did to homes and neighborhoods. These
families are members of ACORN, the Association of Community Organizations
for Reform Now. 



I
was ACORN’s communications coordinator during much of the Household
campaign, but left before it ended. No one has asked me not to tell
this story. 


In
low-income minority neighborhoods in the United States, what little
wealth there is, is in home equity. Home equity makes up 74.9 percent
of the net wealth for Hispanics in the bottom two income quintiles
(0-40 percent) and 78.7 percent of the net wealth for African Americans
in the second income quintile (20-40 percent). There have been gains
in minority home ownership over the past few decades, in part as
a result of the work by community groups like ACORN and National
People’s Action to force banks to make loans in these communities,
but the home ownership is fragile and not protected by additional
savings. Lenders in the past decade have focused on stripping away
equity and community groups have been forced to focus on keeping
out loans that are worse than no loans at all. 


Most
high-cost loans are refinance loans. Too often they are marketed
aggressively and deceptively, including through live- checks in
the mail that result in very high-cost loans that the lender will
be only too happy to refinance into a new mortgage. Often these
loans are made with excessive, sometimes variable, interest rates,
outrageously high fees, and fees financed into the loans so that
the borrower pays interest on them and often is not told about them.
They are made with bogus products built in, on which the borrower
also pays interest. Hidden balloon payments force repeated refinancings
for additional fees each time. Mandatory arbitration clauses attempt
to prevent borrowers from taking lenders to court. The practice
of loaning more than the value of a home traps borrowers in loans
they cannot refinance with a responsible lender. Consolidation of
additional debts further decreases equity, placing the home at greater
risk. Quiet omission of taxes and insurance from a mortgage that
previously included those charges results in a crisis when yearly
bills arrive. 


Predatory
lenders turn the usual logic of lending upside down. They make their
money by intentionally making loans that the borrowers will be unable
to repay. They charge fees for each refinancing until finally seizing
the house. Fannie Mae has estimated that as many as half of all
borrowers in subprime (high-cost) loans could have qualified for
a lower cost mortgage.  


High-cost
loans are not just made to people with poor credit. They’re
often made to people who have poor banking services in their neighborhoods. 


ACORN
members don’t take abuse of their neighborhoods lying down,
and Household was a leading cause of the rows of vacant houses appearing
in ACORN neighborhoods in the 1990s. ACORN launched a campaign to
reform Household that included numerous strategies. One, an ACORN
stand-by, was direct action. Repeatedly, ACORN members in numerous
cities around the country simultaneously protested in Household
offices to demand reform. At the same time, ACORN was working to
pass anti-predatory lending legislation in local and state governments
and Congress. ACORN members made sure that in each case the victims
testifying were victims of Household and that Household’s abuses
were highlighted. When ACORN released major reports on predatory
lending, the examples included were always from Household. 


ACORN
also worked with the Coalition for Responsible Wealth to advance
a shareholder resolution that would have tied Household’s executives’
compensation to ending its predatory lending. In 2001 Household
held its shareholders meeting in an out-of-the-way suburb of Tampa,
Florida. A crowd of ACORN members was there with shark suits and
shark balloons to protest. 





The
resolution won 5 percent. Over the next year, ACORN pressured state
pension funds and other shareholders. Household held its 2002 meeting
an hour and a half from the nearest airport in rural Kentucky. Members
made the trip by car from all over the country. The protest may
have been the biggest thing the town of London, Kentucky had seen
in years. The resolution won 30 percent. 


As
a result, various local and state governments threatened to divest
from Household. ACORN also put pressure on stores like Best Buy
that used Household credit cards. At the same time, ACORN Housing
Corporation was assisting many Household victims in either refinancing
out of their Household loans or at least canceling some of the rip-off
services built into their loans, such as credit insurance. ACORN
was also getting the word out to stay away from Household. 


ACORN
wrote up numerous accounts of Household predatory loans and took
them to the attorney generals in state after state urging investigations.
ACORN similarly pressured federal regulators to act. ACORN assisted
borrowers in filing a number of class-action suits against Household
targeting those of its practices that were clearly illegal even
under existing law. They let Wall Street analysts know what Household
stood to lose from these lawsuits, as well as from various reforms
that Household periodically announced in its attempt to hold off
the pressure. 


But
ACORN members never let up. They protested again and again at Household
offices and held press conferences in front of homes about to be
lost to Household. They protested the secondary market that was
putting up capital for these predatory loans and they held a major
protest at the trade group that lobbied in Washington for Household
and its fellow sharks. Then, in the summer of 2002, in the wealthy
suburbs north of Chicago, victims of Household from around the country
poured out of busses by the thousands onto the lawns of the board
members and the CEO of Household. They knocked on doors and spoke
to those who had hurt them from a distance. When the police made
them leave, ACORN members plastered “Wanted” posters all
over the neighborhood telling the board members’ neighbors
what crimes the Household executives were guilty of. 


Through
all of this, we worked the media. I kept a database of victims’
stories and contact information and put them in touch with reporters
whenever the reporters were willing to tell not just the victimization
story but also the story of fighting back. We generated several
hundred print articles and several hundred TV and radio stories
about Household’s predatory lending practices. We worked the
small neighborhood papers, flyers in churches, posters on walls.
We provoked lengthy articles in the

New York Times, Washington
Post, Wall Street Journal, Los Angeles Times

, and

Forbes
Magazine

. We kept up an endless barrage in the trade press:
the

American Banker, National Mortgage News,

etc. 


A
handful of ACORN staff people with great expertise and unrelenting
effort organized thousands of members to drive this campaign until
Household agreed to pay victims $489 million through the 50 states
attorneys general, and later agreed to pay millions more through
ACORN, as well as to reform its practices. 


This
campaign was an example of what can be done if enough different
angles are pursued at once and the company ripping you off is put
on the defensive and constantly hit with the unexpected. This campaign
increased the size and power of ACORN to effect future progressive
change. This is good news for low-income neighborhoods, but bad
news for Wells Fargo, the predatory lender who is next on ACORN’s
list.



 





David Swanson
is a board member of the Progressive Democrats of America. The views
expressed are his alone. This article first appeared in



The
Wealth Inequality Reader



by



Dollars and Sense



and United for a Fair Economy.