Above: Originally from Nashville, TN, Emma Smith was recently turned down for a loan to cover dental costs despite her long relationship with the bank. She is among a number of Stockton residents who say they have been denied access to credit to help them climb out of debt or cover unanticipated expenses. (Image: Charlie Kaijo)
STOCKTON, Calif. -- After 30 years as a customer with Union Bank, Stockton resident Emma Smith was surprised to learn she did not qualify for a small loan to pay for a dental surgery because she had no credit.
“I am a practical person,” she says, pulling out a picture of her daughter from the inside flap of her hard plastic organizer. “I like to live within my means.”
Smith shared her story at a March 8 roundtable in Stockton co-hosted by the non-profit Housing and Economic Rights Advocates (HERA) and organized by New America Media.
“Anyone would assume because you had this relationship with your bank for 30 years that that was going to be meaningful to them, and it wasn’t meaningful enough,” said Meave Elise Brown, executive director of Oakland-based HERA, whose group has been working to help people like Smith understand what their options are when it comes to getting credit.
HERA is offering free monthly credit education and debt defense workshops, as well as legal clinics on mortgage and collections issues for residents of Stockton and the San Joaquin Valley.
With the help of HERA’s lawyers, Smith is now considering an income-based credit card to help build her credit history. But many others turn to more predatory lending options when they need financial help, options that often target low-income communities of color.
According to the U.S. Census Bureau, in 2014 nearly half of Stockton residents were Latino and over a quarter lived below the poverty line, making them vulnerable to predatory lending and credit schemes.
"By the time I pay my water and my bills and everything, I’m lucky if I have three dollars left a month to spend,” said Stockton resident Casilda Sanchez. “I don’t like to owe anybody anything.”
So when Sanchez received a collection notice in the mail she was shocked. A $2,000 school loan she took out 17 years earlier had accrued interest amounting to twice what she originally borrowed. “My reaction? Oh my goodness, I couldn’t sleep for a week. I was so stressed out.”
Megumi Tsutsui is an attorney working with HERA. She said Sanchez might qualify for loan forgiveness plans. “She gets disability … It can be a fairly simple, straightforward application,” Tsutsui explained, adding, however, “Often times, your servicers, debt collectors, don’t take the time to actually tell you about it.”
Roberto Radrigán, editor of Joaquín, a bi-lingual monthly magazine serving the Stockton area, says many Spanish-speaking residents are often lured in by scam ads targeting Spanish speakers.
We keep getting these new waves [of immigrants], and all of these people come fresh from the outside who will believe anything that Spanish media tells them,” Radrigan said.
In 2014, the National Loan Modification Scam Database compiled 40,000 foreclosure rescue fraud complaints, an epidemic that began during the 2008 sub-prime mortgage crisis. The database, which started collecting complaints in 2010, reported losses of $90 million dollars to homeowners. Nearly a quarter of the targets were black and Hispanic.
“Basically, they say, ‘Hey, if you have a high mortgage balance, we can get that down, we can get you a lower interest rate, lower payments. Everything will be fine. You just need to pay us a certain amount of fees upfront,” said attorney Joseph Jamarillo. One case he helped file a claim against targeted Spanish speaking Latinos through radio ads, direct mailings and promotional videos in Spanish.
Some of the illegal practices Jamarillo has seen include scammers promising borrowers a reduction in principal balance and asking for thousands of dollars up-front before taking any action. Advanced fees in the context of loan modifications are illegal in California. In addition, scammers will ask borrowers to send them their mortgage payments or cut off all communication with the loan servicer.
Other scammers will sell a product called a loan audit where the scammer will collect information on the origination of the loan. “A loan audit really has no value, and it’s not part of the loan modification process,” Jamarillo said. “It’s really a product that was invented to charge money and scam people.”
HERA says it plans to expand workshops and clinics further into the San Joaquin Valley to ensure residents have the information they need to rebuild financial security and avoid scams.