Subprime mortgages designed to fail. Student-loan payment plans that cover interest but not principal. Car insurance that costs less for white drivers than people of color. And payday lenders for when you have nowhere left to turn.
The predatory practices of these four industries shape the everyday lives of many people in this country. In Land of the Fee: Hidden Costs and the Decline of the American Middle Class, University of Missouri history professor Devin Fergus reveals an increasingly stark pattern of economic exploitation through charges, fines, and interest. He argues that over the past half-century, consumer protections have been chipped away, innovated around, or just poorly conceived in the first place, resulting in a system in which the few are extracting obscene wealth from the daily necessities of the many.
That same dynamic has been replicated in the public sector, where fees—such as parking tickets that quickly escalate with late fees and impound fines—now comprise the vast bulk of government-revenue growth. It’s the financial equivalent of death by a thousand cuts—and under the Trump administration, there’s no reprieve in sight. —Susie Cagle
SC: What do you think of the arguments from some advocates for the poor that payday lending is a necessary evil?
DF: A very small percentage of Americans actually take out a payday loan, so it seems sort of marginal. But it really is a signifier of the structural problems of the American economy. The rise of payday lending was the most ubiquitous free-market response to the multigenerational crisis of wage stagnation. So it’s a necessary evil because of the multigenerational crisis of wage stagnation. The payday loan is exactly what it says it is: You need a paycheck to get a payday loan.
SC: How do you define “fee”?
DF: My idea of fees is really an expansive one—it’s anything that goes beyond the principal of a financial product. We have loan-origination fees, activation fees that you might get with a cell-phone or Internet account. And what you often find, particularly with payday lending, is that the industry uses this sort of shell game—calling them fees and not interest—in order to circumvent state usury laws.
SC: And that’s a trend not just in the private sector but in the public sector as well. How do those two differ?
DF: No politician wants to say, “I’m going to raise your taxes,” so you circumvent that by raising fees. This means we can’t have a broader conversation about the value of taxation. Also, typically, these fees fall upon the most vulnerable people in our society. Over the last generation or two, we’ve seen that 80 to 90 percent of all new government-revenue growth has been the product not of taxation but of things like fees and fines. It’s even more regressive than a flat tax.
SC: You draw a direct line from the financial reforms of the 1960s and ’70s, which were based on the idea of extending credit because credit is good, to predatory lending and an increase in fees on marginalized communities.
DF: This is the 50th anniversary of the Poor People’s Campaign launched by Martin Luther King and others, and one of the pillars of that campaign was to democratize credit. And we’ve seen in these last years an expansion and a democratization of credit, but without the expansion of the regulatory state. We live in a world in which we’re commuting longer distances, working longer hours—we have less time than ever before, while our financial lives are far more complex. You need a regulatory state to step in to police the potential for abuse.
We see the rise of fees increasingly targeting the fastest-growing segment of Americans: people of color. Just because they’re the most vulnerable doesn’t mean they’re necessarily the poorest. The middle class is becoming browner. Those are the people predatory lenders are interested in, because they have things like equity in their houses. They want people with resources. So that’s a great concern and great fear. The collision course we’re headed on gives me great pause. n