More Proof on Payday Lenders Targeting Vulnerable Communities

Citizen Wealth Financial Justice
The Economic Impact of Payday Lending in Economically Vulnerable Communities Haydar Kurban, Ph.D., Adji Fatou Diagne, Charlotte Otabor December, 2014
The Economic Impact of Payday Lending in Economically Vulnerable Communities
Haydar Kurban, Ph.D., Adji Fatou Diagne, Charlotte Otabor
December, 2014

New Orleans          Payday lending was the first national campaign for ACORN Canada and, despite winning some relief in several provinces, the effort to clamp down on the industry nationally continues to be a priority and continues to elude.  Currently, ACORN is on a national advisory committees studying another effort to update the regulations.  In doing so, a fascinating study fell into our hands that was written by the Howard University Center on Race and Wealth in Washington, D.C focusing on the economic impact of payday lenders in Florida, Mississippi, and Alabama.  It’s an eye opener!

Using sophisticated data mining and software with current Census Bureau economic data, it was no surprise that the Howard researchers found that payday lenders swarm to communities and zip codes dominated by lower income and minority families like vultures on the highway fly towards road kill.  That’s not news.  Importantly, Howard found that, despite the industry claims, the short term negative impacts on these states were significant.  Florida, as the largest of the states studied, bore the brunt of the damage the hardest.   There “the payday loan industry destroyed 2,150 net jobs, and reduced labor income, value added, and total sales by about $107 million, $308 million, and $381 million.”  Alabama and Louisiana also took a licking from the industry, though interestingly Mississippi was so desperately poor and unbanked that on the short run they showed some benefits from payday lending, though the decreases in savings and citizen wealth would wipe that out quickly in subsequent years.

Looking at the maps on zip code concentrations, the industry strategy is redlining in reverse as they try to pile as many stores as possible into lower income areas.  This seems to support the successful strategy being employed by ACORN in Burnaby and Surrey of using zoning strategies to prevent multiple payday lenders in our lower income areas.

The report speaks for itself.  Looking at part of their data analysis of Louisiana is unsettling:

Louisiana ranks sixth in the country in the percentage of households reliant on the combination of check cashers, pawnbrokers, and payday lenders to meet family needs, with 23 percent compared to the national average of 18 percent. Additionally, African-American households in Louisiana are twice as likely as white households to use predatory lending such as high-cost financial services and payday lenders at 37 percent compared to 17 percent. Payday lenders are prevalent in every major Louisiana city, with payday loan stores outnumbering banks in low-income neighborhoods, according to a 2009 FDIC study. Approximately 57,000 households (3.2 percent) in Louisiana took out at least one payday loan in 2007. The problem is more pronounced in larger parishes. For example, in East Baton Rouge Parish, the median household income is more than $4,000 higher for those living in bank neighborhoods (that is, neighborhoods with access to traditional banking institutions) than for those living in so-called “payday-loan neighborhoods” (Mathis, 2011). Payday-loan neighborhoods in Orleans Parish, on average, are 70 percent African-American, with median household earnings of $16,562 and bank neighborhoods in the parish are 46 percent African-American with median household earnings of $24,137 per year. It appears that payday lending is threatening the economic and financial environment of African-American families in Louisiana who encounter poverty at almost three times the rate of white families in the state.

When predators come near your family and community, you build a fence, you pass our flyers and warnings, you tell children to walk the other way, you notify the police to keep an eye out, and hunker down.  The payday lending industry specializes in the kind of behavior and targeting that requires the same kind of protection in terms of regulations, ordinances, and legislation.  Stealing is stealing, and it is past time to name the crimes they are committing in our communities and put a stop to it.