Prometheus 6

This is not the sort of thing designed to endear these folk to my heart.

At the end of June, as the subprime mortgage crisis was driving the economy into a tailspin, Charles Steele Jr., the president of the Southern Christian Leadership Conference (SCLC), took to the op-ed page of the Washington Post to decry the devastating effect the meltdown was having on minority homeowners. But rather than support currently pending measures to better regulate the credit markets, the leader of one of the nation's oldest civil rights groups instead attacked them. Steele was particularly upset about a Federal Reserve proposal that would crack down on subprime credit cards—high-interest cards marketed to people with bad credit.

Steele rose to the card issuers' defense, invoking his group's founder, Martin Luther King Jr., and claiming that any move to regulate the cards would deny minorities access to much-needed credit. (In July, after another op-ed piece on a similar topic appeared under Steele's byline in a a handful of papers, he claimed he didn't write it or authorize its release; according to Steele's lawyer, a Washington public relations and lobbying firm was behind the commentary.) The argument was an odd one coming from a civil rights group. Most consumer groups believe that the subprime industry is largely predatory, and rife with abuses that disproportionately affect minorities. But Steele's op-ed makes a lot more sense when you consider a detail the Post at first left out: In August 2007, the SCLC formed a partnership with CompuCredit, a subprime credit card issuer and payday lending company. (The Post later updated its story to reflect this.) The deal included plans for an affinity card that would put the famous civil rights group's name on CompuCredit Visa cards and joint "economic empowerment" workshops around the country to help educate minorities about credit. When Steele announced the deal last year, he said, "Consistent with SCLC's historic commitment to civil rights and economic justice, this partnership represents a critical part of our campaign for economic empowerment."

While the civil rights group has been lauding its corporate partner, the federal government has taken a slightly different view of CompuCredit's contributions to economic empowerment. Last month, the Federal Trade Commission sued the company for unfair and deceptive trade practices, as well as violating the Fair Debt Collection Practices Act. The FTC alleged that CompuCredit bilked consumers out of at least $217 million through a scheme in which consumers paid so much in fees that they rarely had any credit available on the company's Visa cards. The CompuCredit cards are better known as "fee harvesting" cards—that is, credit cards sold to people in dire financial straits that have high interest rates, low credit balances, and lots and lots of fees for people who generally can't afford them. The practice is enormously lucrative. The National Consumer Law Center reports that in 2006, CompuCredit made $400 million in fees on such cards, simultaneously saddling consumers with more than $1 billion in debt.

The FTC also alleged that CompuCredit was working in tandem with its debt-collection arm, Jefferson Capital, in a complex scheme that used the credit cards as a way of duping consumers into paying off old debts that had been discharged by other lenders. Far from lifting consumers upward, CompuCredit was leaving its customers mired in debt, from which they would have a tough time escaping.

The fraud allegations against the company don't seem to have soured the storied civil rights group's enthusiasm for it. After the FTC filed its suit in June, Steele defended the company, saying that CompuCredit "has been a true friend to the SCLC and to the communities and individuals it serves, and in our opinion is one of the few financial services companies that is working diligently to increase access to credit in underserved communities." Steele did not return a call for comment. Of CompuCredit's relationship with the SCLC, Tom Donahue, the company's director of corporate communications, says, "As a company that provides credit products and financial services to financially underserved consumers, CompuCredit has an abiding interest in working with individuals and third-party organizations that share our commitment to financial education and to helping credit-challenged consumers bridge their way to a prime credit score and the financial mainstream."