Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, December 14, 1994                   TAG: 9412140107
SECTION: EDITORIAL                    PAGE: A-10   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

GIVE MORE CREDIT WHERE IT'S DUE

Much of what the stories described constituted illegal fraud and deceit. Such predatory practices as home-improvement scams and hidden charges in loan contracts carry criminal and civil penalties. The problem is not the absence of laws but the insufficiency, for one reason or another, of their enforcement.

Much of what was described is not illegal, but does reflect poverty's cycle of powerlessness. Lacking money, the poor seek credit; lacking good credit histories for lack of money, they take out loans at rates that a more affluent or financially educated borrower would reject out of hand.

And much of the series renewed questions about the role of reasonable-rate traditional lenders - banks and savings-and-loan institutions - in making credit available in lower-income communities. If credit cannot be obtained from those sources, it is to the high-priced lenders that prospective borrowers too often must turn.

Piling more sets of regulations on existing regulations, which themselves are one reason that informed decision-making about credit can be forbidding to the uninitiated, is not an attractive solution. Moreover, to look at credit problems and predators is, in a way, to look at a symptom rather than a cause of the deeper disease of poverty itself.

Yet, as the stories made clear, poverty and predation feed on each other. That the poor are more easily plundered may be a symptom of their poverty, but the plundering also contributes by making the poor poorer.

To be skeptical of more regulation is not to say improvement is impossible. One strategy, for example, would be to expand rather than continue to shrink legal-aid programs for the poor. That might at least make more con artists liable for civil damages. If such counsel were consistently available, it might also encourage more lower-income people to make a habit of subjecting loan contracts to professional scrutiny, to ensure that the terms are clearly understood and reasonably competitive.

Promoting the availability of competitively priced credit in lower-income communities, particularly for housing, is another promising strategy. The Community Reinvestment Act appears to be helping, if for no other reason than the need for lending institutions to show compliance before they can acquire other banks.

Efforts to teach prospective homeowners how to navigate the system also are worth expanding. After the complicating factors of income, credit history and wealth are taken into account, the best evidence suggests that discrimination against racial minorities in particular arises because the hurdles in problematic applications are easier, or made easier, to surmount for some than for others.

In the absence of health-care reform, medical bills alone can often make the (arbitrary) difference between ruined credit history and successful home-ownership.

As such, it's worth being reminded that increased access to the American Dream serves the interests not only of poor people and the community at large, but also of lending institutions. It was high-flying speculation in commercial real estate, after all - not home loans for low-income people - that sent much of America's savings-and-loan industry into receivership.

Smart lenders are waking up to the fact that a lower-income family working to own its home makes a more reliable customer than those for whom credit is a game.