Why Financial Predators Usually Have Black Prey

18 Apr

By Dr. Boyce Watkins

http://www.DrBoyceMoney.com

I talked to my good friend Ryan Mack, CEO of Optimum Capital Management, the other day. Ryan wrote an interesting piece about The Rushcard, a new prepaid debit card offered in a partnership between Russell Simmons and Unifund, a company that typically makes its money from bad debt collection. I read the piece curiously, as I have been learning how the Rushcard works, why it exists and who might benefit from the service. On the flip side, there is the larger concern that someone might be taking advantage of those who have the least access to capital, largely African Americans in poor communities.

The Rushcard is a prepaid banking card with no credit check that allows consumers to deposit their paychecks onto the card, as well as make purchases and withdrawals as if the card were a regular Visa. Russell (a self-proclaimed “philanthropist”, a title likely used to pre-empt any accusations of fraud or exploitation) also argues that the card helps marginalized Americans to seek out the American dream.

I didn’t know that the American dream was to hold a piece of plastic. Credit cards have created an infinite number of American nightmares as they tend to breed excessive consumption. But one can certainly argue that this card deals with one serious problem in the Black community: a lack of access to capital and banking services. Many people in urban America can’t get bank accounts. Many more have bad credit, can’t get rental cars or find themselves leaning toward check cashing services to liquidate their paychecks. Russell, “the philanthropist” has apparently taken it upon himself to solve this problem.

I can say, as a Finance Professor, that the Rushcard would likely not make money if it were not filling a critical need. The problem, however, is that those who “help” individuals in need may end up abusing their power. One can argue that a pimp is “helping” a young homeless girl by giving her a place to live. A loan shark can say that he is “helping” a family get the money they need by lending the funds at exorbitant interest rates. A man who sells water for $10 a sip is “helping” a man in the desert get what he needs to survive. So, there is a thin line between “helping” someone vs. exploiting a given need or weakness.

I became quite concerned when I saw the long list of complaints from those using the Rushcard. Those who wrote the comments I saw on a blog about the Rushcard seemed to have serious problems with the customer care behind the card. In his article, Ryan does an interesting comparison between the fees of the Rushcard vs. those of a typical Bank card:

Rushcard vs. Typical Bank Card
Activation Fee: Rushcard = $19.95 Typical Bank Card = Free
Convenience Fee: Rushcard = $1.00 Typical Bank Card = Free
ATM Cash Withdrawal: Rushcard = $1.95 Typical Bank Card = Free (At Branch)
ATM Balance Inquiry: Rushcard = $.50 Typical Bank Card = Free
Bill Payment: Rushcard = $1.00 Typical Bank Card = Free
Inactivity: Rushcard = $2.95 Typical Bank Card = Free
Refund of Rushcard/Bank Card via Check: Rushcard = $5.00 Typical Bank Card = Free

So, if these numbers are any indication, it appears that the Rushcard is not a very good investment. Most reviews that I’ve seen recommend against using the card, since it appears that users are paying a premium for the Baby Phat design on the front. What’s more disturbing about the Rushcard is that Russell does not seem to be nearly as determined to fulfill his role as a “philanthropist” when it comes to helping African Americans overcome the underlying cause of the very problems he claims to be fixing. As Ryan explained it, “It’s like telling someone with a cavity that they should chew with the other side of their mouth.” The Rushcard offers few options to help people repair their credit, and I have personally found most of Russell’s financial literacy initiatives to be quite limited in impact.

While we cannot blame Russell Simmons and others for profiting from the lack of financial literacy and access to capital in the Black community, there are things we can do to encourage Russell to do the right thing. First, the Obama administration can and should implement programs to help those with poor credit obtain bank accounts. Every American should have access to a bank account, and services such as direct deposit should not be a luxury. Secondly, the Banking industry should stop passing over profitable investment opportunities in the Black community. Perhaps if Russell had more competition, his fees might go down. Third, there is no greater cure for money problems than good old fashioned financial literacy. Most victims of financial exploitation are not even aware that the exploitation is taking place. Financial literacy should be taught in every public high school in America, since it might actually be the one class that students actually use.

Russell Simmons is not necessarily a philanthropist, but he is not the devil. He is merely a symbol of a larger problem. The problem requires long-term solutions, and a high cost piece of plastic is certainly not one of them.

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He makes regular appearances in national media, including CNN, BET, ESPN, and CBS. For more information, please visit www.BoyceWatkins.com.

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3 Responses to “Why Financial Predators Usually Have Black Prey”

  1. Melinda Price April 29, 2009 at 1:33 am #

    Thank you for this article regarding the RushCard. I had thought about getting one, however, with the ridiculous fees, I am not going to purchase one.There are other debit cards out there with low cost fees, such as Walmart and the Netspend card. Some financial experts recommend that you get a debit card when you are unable to obtain a bank account. Fortunately I have an account with SunTrust Bank, however I would like to obtain a checking account with my Credit Union, but they will not approve me (even though I have a savings account with them). I guess I will just continue with SunTrust.

  2. NA May 1, 2009 at 7:34 pm #

    I completely disagree with this. This is a prepaid card. People who require a typical bank card would not utilize a rush card. You are comparing apples to oranges. What you should be comparing is other prepaid cards (which have grown in popularity) to rush card which is also a prepaid card. The rush card is meant to help people who have bad credit, ill spending habits, teenagers/young adults or people who just feel more comfortable using their own money. I have been a member of Rush Card since its inception. At the time, my credit was shot and I was not able to get a regular bank account or card. The Rush card made it easier for me to pay my bills online and get my credit straight. I reviewed your page regarding the complaints but there are hundreds of more people who are thankful for Rush Card. All of my friends have Rush Cards and in all the years that I have had it, I have not had a single incident and they haven’t either. Please be sure to be fair in your critical analysis and interview all spectrums of their customer base. This article was biased with no real basis. As I mentioned before, if you are going to analyze, make sure its prepaid card vs. prepaid card. Thanks

  3. ;lih;jil May 22, 2009 at 10:41 pm #

    So, where do Unifund proceeds go after the Zises Brothers ACAP Offshore laundering in the Cayman Islands? …funding of Israeli settlements in Palestine, according to AlJazeera:
    “The Roundtable Political Action Committee includes Riklis, junk-bond king Michael Milken and founders Jay, Selig and Seymour Zises. Seymour Zises is also president of the National Political Action Committee, NPAC, which works in tandem with AIPAC, the highly influential American-Israeli Political Action Committee. Jay Zises is president of “Friends of the Israeli Defense Forces.” Others include Ivan Boesky and executives of United Fruit/Chiquita Banana while the son of Loew Corp. owner, Laurence Tisch, is a co-founder.
    Menachem Atzmon, convicted of campaign financing fraud in the 90s, and Stephen L. Friedman are partners of International Consultants on Targeted Security (ICTS) run by former Israeli military commanders and government intelligence agencies. In 1999, ICTS took over management of security at Logan Airport in Boston under its subsidiary Huntleigh , USA and was in charge on 9/11. Friedman is a member of the Israel Defense Fund. And then there’s Ronald Lauder, heir to the Estee Lauder cosmetic fortune who is treasurer of the World Jewish Congress and a trustee of the Special Reserve Fund of the Anti-Defamation League.
    Media links are not missing. Marc Belzberg, business partner of the Zises, owns the Jerusalem Post and funds West Bank settlements. He’s a major supporter of the Sharon-linked yeshiva seminary rumored to be training the priesthood for the Third Temple to be built on the Temple Mount after the Al Aqsa mosque is destroyed. Along with Ira Rennert, and Irving I. Moscowitz, Belzberg was involved in the contentious opening of the tunnels under the Al Aqsa mosque; one opening caused 76 Palestinians deaths in three days of fighting. Rennert now controls the tunnel entrances. Moscowitz funded Jewish take-overs of housing in East Jerusalem and settlements in the West Bank .
    Marvin Josephson, owner of Hollywood ‘s International Creative Management (ICM) agency, has not only been Henry Kissinger’s literary agent but is Chairman of NPAC. Mortimer Zuckerman owns US News and World Report and the New York Daily News. He regularly agitates for war against Saudi Arabia and other Arab nations in his column US News. He is a director of “Friends of the Israel Defense Forces.”
    Mervyn Adelson, ex-husband of Barbara Walters and former Chairman of Lorimar Telepictures, is a friend of Benjamin Netanyahu. His lawyer, Yaakov Ne’eman, was Israeli Finance Minister under Netanyahu. Henry Kravis of RJR Nabisco is also a sponsor of Israel ‘s right wing and a Republican donor with ties to the Bush family.
    Underworld connections come from casino owners with early ties to the Meyer Lansky/ Moe Dalitz Mafia syndicate. They include Mervyn Adelson and Sheldon Adelson. Sheldon wants to build casinos in Israel and has been granted gambling licenses in Macao , China along with Steven Wynn, owner of the Mirage casinos. Wynn sponsors right-wing Israeli causes, has ties to Lansky and is a member of the board of the George Bush Presidential Library. Henry Kravis has early ties to Lansky but isn’t connected to gambling. However, the EU has accused him of narcotic money laundering.”

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