Payday Lending

A Predatory Banking Industry for the Poor

Most lower-income workers live paycheck-to-paycheck, often running out of money before the next paycheck comes in.  Even in families who budget carefully, unexpected expenses can trigger the need for a payday loan, payable when the next paycheck comes in.  In the services vacuum created by traditional banks in lower-income communities, check cashing outfits and payday lenders have stepped in to offer basic checking services in lower-income communities, as well as small, short-term loans for a steep fee.

However, high fees for payday loans usually mean that the borrower will fall short before long, and need to take out yet another loan.  In California, for example, the average fee charged to customers is $17.65 for every $100 borrowed.  This amounts to an annual interest rate of 459% for a typical two-week loan.[1]

Payday lenders are nearly eight times more concentrated in California's African-American and Latino neighborhoods as compared to White neighborhoods, draining these communities of $247 million in payday loan fees[2]

Greenlining works with financial institutions to encourage them to provide traditional banking services to lower-income customers

[1] Center for Responsible Lending.  "Predatory Profiling:  The Role of Race and Ethnicity in the Location of Payday Lenders in California"  Wei Li, Leslie Parrish, Keith Ernst and Delvin Davis.  March 26, 2009.

[2]Ibid.