More ESG baloney, er hypocrisy??

Baseball_Fan

So...read Barron's this morning...there was a snippet from a fund mgr from one of the Parnassus funds...he was referring to when elminating gambling, carbon energy, defense companies, blah, blah, leaves him with a smaller subset of companies in which to invest in...then speaks to Discover card stonk passing his "ESG screen" due to diversity, valuation, blah, blah.

First thing I think of is... you gotta be sheeting me. Credit card companies have got to be one of the least socially responsible and most racist organizations on the planet. Loan sharks. Pay you out 0.40% American Express savings and charging you what 13-22% interest on their "loans". And I haven't looked it up but I would venture to guess, in general, minorities pay way higher rates than white folks do, no (is that a fair assumption, can we be real with each other?) So they oppress folks of color and handicap (bury them in relentless debt load) them with their never ending daily compounding interest with their loan shark line credit card loans and this fund mgr is spouting his ESG drivel...screw that...are these folks for real?!?

Baseball Fan

LewisBraham

Not that any lender doesn’t have issues but:https://investorrelations.discover.com/newsroom/press-releases/press-release-details/2020/Discover-Releases-Latest-Corporate-Responsibility-Report/default.aspx

https://google.com/amp/s/www.cnbc.com/amp/select/discover-coronavirus-assistance/

carew388

Other issues I'm more concerned with: new COVID variants, used car prices, dealer fees on new cars, climate change, international tax shelters, the list goes on !

davidrmoran

@Baseball Fan

>> Can we be real with each other?

Are you saying that credit card companies actually know the color of a cardholder?

>> in general, minorities pay way higher rates than white folks do,

How does that work, in your mind ? Serious question.

This might interest you:

https://www.creditcards.com/credit-card-news/race-age-gender-statistics/

>> they oppress folks of color and handicap (bury them in relentless debt load)

Hell, they 'oppress' everyone they possibly can. They do market aggressively to those in need, no question --- no matter who. And of course they charge as much as laws allow --- it's a business. Maybe loathsome. A lifesaver to many poorer individuals and families, of course.

(I was expecting someone 'conservative' to weigh in about savings and budgeting and personal responsibility and all that stuff.)

I've never heard the racism charge made quite this way. As though it's policy.

LewisBraham

Parnassus Manager Hwan's impression is that the behavior of lenders like Discover during the Covid crisis was far better than during the 2008 crisis as indicated by the company's willingness to offer temporary relief to strapped borrowers. As for credit card lending rates in general, it's hard not to look at them as usurious. But this has always been true as far as I can tell. Would I rather invest in a credit card company than an oil driller poisoning the planet from an ESG perspective? I would say yes. The lenders that tend to take the most advantage of minority groups and the poor in general aren't the credit card ones, but the payday lenders. They make credit card companies look like angels in comparison: https://consumerreports.org/loans/new-payday-loan-ruling-is-bad-news-for-borrowers/

On Election Day last month, more than four out of five Nebraska voters approved a ballot initiative that would cap interest rates on short-term, ultra-high-interest payday loans at 36 percent. The previous law allowed annual rates to climb as high as 459 percent....A 2015 survey by the Federal Deposit Insurance Company found that Hispanic and Black Americans are two and three times as likely to take out payday loans than non-Hispanic whites, respectively. And several studies by the Center for Responsible Lending have found that payday lenders disproportionately target areas with higher concentrations of people of color, even when the population data is controlled for income.

davidrmoran

I left Parnassus because of their lingering embrace of Wells-Fargo, no matter what news came out.

Surprising Shkreli and Holmes have not found a way into payday lending.

LewisBraham

I agree that it seems like they waited too long on that one, but they did ultimately sell Wells Fargo and said it was for ESG reasons: https://parnassus.com/updates/article/parnassus_sells_its_wells_fargo_holdings

davidrmoran

yeah, for me that was waaay too late, bullshit, also like being sorry for getting caught

ample ample evidence prior, again and again and again; not a true tipping point, where the behavior just then passed some threshold

Baseball_Fan

Hi @davidmoran,

So sure obviously the cc co's cannot directly ask about race...but...last I checked they ask for address, what you do for a living, income, zip code etc...so what race are you if you live in 60621? How bout 92037? (I'll save you the time, Englewood, Chicago, and Lajolla San Dog. So my point is that without having the data in front of me. One area likely pays much higher interest rates than the other...and one race is biggly predominant in each zip code. So yes, in mind race does come into play.

You don't think indirectly the end result with the cc co's army of actuary's is they know exactly who they are "lending", I mean loan sharking to. Why is the interest rates not the same for everyone. Blend it. Why are they allowed to burden deeply some with higher interst rates? Go look at the financial metrics of co's like MC, V, etc...some of the best business models, stonk results out there..huge margins, cash flow, etc...

I have no knowledge of this, but what happens with a school loan? Are the interest rates all the same or are they different based on zip codes, addresses, uh, race (sorry David, had to throw that in there...)

Best to All,

Baseball Fan

BenWP

I tend to agree with those who find the credit card business somewhat shady. OTOH, I have been a fan of AKREX for as long as it has been around and that fund is a huge holder of MasterCard and Visa. Repeatable, compounding businesses that even the most discerning consumer can hardly avoid. For my part, the ESG moniker on a MF might make it sound like one of the good guys, but in the end I don’t pick my funds for their adherence to ESG principles, some of which are ill-defined.

LewisBraham

The issue with credit card companies and race seems not to be one currently of gouging with higher interest rates like payday lenders but who companies are offering credit to at all. My reading indicates that many minorities and African Americans especially don't have access to credit cards at all, often because fewer are home owners and don't have established credit histories. That's despite the fact that many might have established reliable histories as renters card companies could investigate if they chose. It's not so much racism of usury it seems but of exclusion altogether. This explains the issue rather well:
https://forbes.com/advisor/credit-cards/from-inherent-racial-bias-to-incorrect-data-the-problems-with-current-credit-scoring-models/
And this too: https://morningconsult.com/2019/06/03/access-to-cheap-money-has-a-racial-gap/

davidrmoran

@Baseball_Fan

>> Why is the interest rates not the same for everyone.

Well, with credit cards and student loans it is, by law, I am reading, with variance chiefly due to fico score. That is the key to your (so far as I can tell mistaken) argument.
I imagine some of us here are in in general violent agreement with you, but it appears your premises and understanding are off.

Direct your protest toward mortgage rates and banks and banking industry, and even there it is notionally fico-based (and obviously property-based). Nonmajority mortgage rates are indeed very different, though again based on factors other than color. (By law.) It is all a system, which is what is meant by systemic racism. See:

https://www.jchs.harvard.edu/blog/high-income-black-homeowners-receive-higher-interest-rates-low-income-white-homeowners

RE broker practices, another area regulated by law, are often tested and found wanting, to put it generously.

Lots of effort has gone toward improving nonmajority credit standing, savings, RE ownership, etc etc etc, obviously without enough successes.

msf

LewisBraham said:

The issue with credit card companies and race seems not to be one currently of gouging with higher interest rates like payday lenders but who companies are offering credit to at all. My reading indicates that many minorities and African Americans especially don't have access to credit cards at all, often because fewer are home owners and don't have established credit histories. That's despite the fact that many might have established reliable histories as renters card companies could investigate if they chose. It's not so much racism of usury it seems but of exclusion altogether. This explains the issue rather well:
https://forbes.com/advisor/credit-cards/from-inherent-racial-bias-to-incorrect-data-the-problems-with-current-credit-scoring-models/
And this too: https://morningconsult.com/2019/06/03/access-to-cheap-money-has-a-racial-gap/

For more detail and additional issues: National Fair Housing Alliance, Discriminatory Effects of Credit Scoring on Communities of Color, 2012

There seems to be a lack of clarity in what people mean by "credit card companies". There are networks and brands (e.g. VISA, Mastercard) and there are credit card issuers (banks).

Discover is unique in that it operates its own network and is the exclusive issuer of cards, unlike Amex, and certainly unlike VISA and Mastercard that are only networks. Fidelity Amex Card was issued by FIA card services, a division of Bank of America. So before knocking American Express, check the back of your card to see who issued it.

It is generally the issuing banks, not the networks, that establish the criteria for credit, sets the rates, and charges consumers fees (late fees, annual fees, service fees, on and on). All based on nominally neutral scores and factors that are anything but.

One of Lewis' links contained a link to Discover's 2019 CRR. Here's the current 2020 version: https://www.corporatereport.com/discover/2020/crr/index.php

davidrmoran

yeah, NFHA has lots of informative / disturbing deep dives more recently, e.g.:

https://nationalfairhousing.org/using-spcps-blog/

covering race-based denial rates and more

( interesting link within:
https://www.consumerfinance.gov/rules-policy/regulations/1002/8/ )

plus guidelines for the new admin:

https://nationalfairhousing.org/wp-content/uploads/2021/01/NFHA-Priorities-for-Biden-Administration-and-117th-Congress-2021.01.05.pdf

A great repository, including most recently covering SCotUS ruling on presidential removal of the FHFA head. Changes ahead maybe, incremental.