How low can you go? Lending money to low-income communities has become financial and political fodder for those exploiting them. From predatory home loans, car title loans and pre-paid debit cards, these so-called solutions are not the good ideas many in the low-income community thought they would be. The recent catastrophe of predatory lending comes at the hands of Russell Simmons “RushCard” prepaid debit card product. Thousands of low-income cardholders have had no access to their money in over a week and no idea when it will be available.
Russell Simmons launched the “RushCard” in 2003 with Bancorp but are now issued through MetaBank. According to the NY Times, the majority of cardholders earn less than $15,000 a year. Simmons saw how low-income households weren’t able to obtain traditional bank accounts and the card would serve as a tool to make purchases and payments, utilizing the VISA/MC logo.
In its most recent survey, the F.D.I.C. counted 25.4 million people in the United States in 2013 who had no bank account. Another 67.5 million had an account but also relied on nonbank financial services such as check-cashing stores or payday lenders.
These services all come with outrageous fees attached to them. From balance inquiries, receiving a statement to using the ATM, the fees can total up to an additional $20 being charged to the account holder. Russell Simmons wasn’t alone in getting paid via the lending business, but his non-black counterparts got out the game, when questioned on how much they were charging customers.
Kim, Kourtney and Khloe Kardashian were hawkers of pre-paid debit cards, once upon a time. But when cardholders couldn’t keep up with the fees on the cards, the reality tv darlings left the business less than a month after entering it.
Financial guru Suze Orman has made millions off of being frugal but didn’t pass that concept to her now defunct Approved Card by Suze Orman. After being hailed by U.S. News & World Report as one of the “best” pre-paid cards in 2012, Orman left the business a mere two years later over the high fees being charged to cardholders. In that same article, the Rush Card was listed as the “worst”.
Related article: The 5 Best and Worst Prepaid Cards
Earvin “Magic” Johnson
Although Magic Johnson wasn’t in the business of peddling pre-paid debit cards, he was in the business of peddling subprime loans, as the spokesperson of the WAMU Home Loan Centers located throughout South Los Angeles. He got a pass because of his work bringing in a movie theatre and Starbucks to the inner city, however, the devastation of the home loans partnership is still being felt today.
In spite of this recent glitch, Russell Simmons is trying to do some good with the shit load of money he is making off the low-income community. How? He invests it back into nonprofits serving low-income neighborhoods. The cities of Baltimore, Chicago, Cincinnati, Los Angeles and New York were the first grant recipients. Keep the Peace is a program under Rise to Thrive, RushCard’s community outreach initiative.
In 2014, Simmons launched RushCard’s Keep the Peace initiative, a neighborhood grant program designed to support nonprofit, community based organizations across the country that have developed unique and successful models for reducing youth violence in their neighborhoods. One of the programs selected, A Better LA, is the brainchild of former USC head football coach, now NFL coach, Pete Carroll.
A Better LA supports community-based solutions to restore peace, save lives and give Angelenos living in inner city LA the resources they need in order to thrive.