LAND OF THE FEE

An inquiry into expenses associated with consumer borrowing.

"Consumer financial fees have helped to choke off dreams of the middle class and middle class aspirants alike," argues Fergus (History and Black Studies/Univ. of Missouri; Liberalism, Black Power, and the Making of American Politics, 1965-1980, 2009, etc.). In particular, the author investigates several common financial transactions that he contends involve hidden or excessive fees so egregious that they are damaging the economic well-being of Americans, including subprime mortgages, student loans, and payday lending. The damage these forms of borrowing have done to American households during and after the Great Recession is already well-known. Fergus traces in detail the discouraging story of congressional inaction by both political parties that has permitted lenders to sidestep usury laws as they burden unsophisticated borrowers with excessive interest and charges like origination fees and prepayment penalties. His discussion of payday lending is particularly incisive, showing how conventional banks have colluded with predatory lenders to fleece desperate borrowers, though Fergus’ failure to differentiate fees from outrageous interest rates weakens his case. Throughout, a difficulty is that Fergus never clearly defines what he means by a fee. The word may or may not include interest, tuition, or payment for actual services such as title searches; obfuscatory rulings by federal agencies add to the confusion. While he provides a valuable history of legislation that enabled these new forms of consumer lending, the author fails to refute the intuitive conclusion that it is the loans themselves and their interest rates—not associated fees—that create the real burden on borrowers. Nor does he look closely at such fundamental issues as why so many qualified borrowers were steered into subprime mortgages or why college costs have skyrocketed, thus necessitating student loans, in the first place.

Good legislative history but a muddled and unconvincing argument about a cause of middle-class financial woes.