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Buzzfeed article on Clayton Homes


Mark Jr.
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FICO has and had a similar problem. This makes me think the allegations against Clayton are a product of the business model (spill-over effect). I doubt the company is targeting folks.

 

Minorities (particularly black men and women) have statistically significant low scores. One thing they found is that black families are more likely to go "un-banked" and not even have a checking account. This study is a big reason why Green Dot/Blue Bird cards started gaining in popularity. A lot of this goes back in history, both to the obvious racial issues in America and to black families getting repeatedly screwed during bank runs. Non-English speakers have always been less likely to use traditional banking (which partially explains latino scores going down). You will see the same issues alleged with Clayton at any Payday Loan shop. FICO is releasing a product in 2016 (FICO XD with Experian; TransUnion went off on their own for this type of scoring) that will score non-banked individuals. It should be a huge boost to a lot of these communities that can't get themselves out of the rut they were and continue to be forced into.

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"Minority borrowers earning between $75,000 and $100,000 on average pay interest rates slightly higher than those paid by Vanderbilt’s white borrowers making only $25,000 to $50,000, according to a BuzzFeed News–Seattle Times analysis of recent federal loan data."

 

That is quite a big difference, perhaps the FICO scores should do some absolute income checks that are weighted higher. Overall, the article does suggest a sort of sleazy operation. Probably alot  can be solved if they just separated financing and sales but then again notice it's in the financial products section of BRK balance sheet. Probably this is their actual big business, without which they'd make far less. Interesting question: Should a company have tough credit terms in a world once again loose with them, to prevent ending up like all the bankrupt companies from just a few years ago?

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