by Charlene Crowell

(NNPA)—In the midst of long-term, double-digit unemployment and millions of foreclosures, many in America are struggling to financially hold on. But for others, the plight of the poor is prime-time for making money—and a lot of it.


In “Broke USA,” author Gary Rivlin shares how payday lending has become a $33 billion a year “poverty industry.” With small dollar loans typically ranging from $300-$500, some in America are getting rich off of the multitudes who are just scrimping to piece together a modest living for themselves and their families.

In a recent National Public Radio Interview, Rivlin, a former reporter for The New York Times shared his reactions to his lengthy study of an industry that preys upon people with little money and few options for credit.

“To me, the real reason payday has grown like it has is more of an economic reason than a geographic reason,” observed Rivlin. “There’s been stagnating wages among the lowest 40 percent [of wage earners] in this country, and so they’re not earning anymore real dollars.”

Continuing he added, “At the same time, rent is going up, health care is going up [and] other expenses are going up, and it just becomes harder and harder for these people who are making $20,000 or $30,000 a year to make ends meet.”

According to research by the Center for Responsible Lending, each year, $5 billion is taken from the pockets of working families to pay for interest on loans from one of 24,000 payday lenders now in operation—more than the number of McDonald’s or Burger King restaurants nationwide. The average payday borrower has nine repeat loans per year. A $300 loan typically costs $50 in interest by year’s end, and the customer actually owes more in interest than in principal.

Further, CRL found that nearly 59 million repeat payday loans actually account for 76 percent of the industry’s revenues. And among repeat borrowers, 87 percent occur within two weeks of a previous loan. Payday lending with 400 percent interest rates is not a bridge between families’ expenses and income shortfalls; it is a debt trap that is a fast track to deeper financial troubles. It is the triple digit interest rates that wind up forcing customers deeper in debt with every passing payday.

Worse yet, CRL research further verifies that this billion dollar growth industry preys most upon communities of color—Black and brown.

In California, the nation’s most populous state, payday lenders are nearly eight times more concentrated in African-American and Latino neighborhoods as compared to White areas.

In this one state, $247 million is drained from working families in fees alone. Even after accounting for variables such as income, poverty rates and education, payday lenders were twice as likely to operate in communities of color.

In Phoenix, Arizona’s largest city, the same preponderance of payday stores in communities of color is repeated. South Phoe­nix, historically the only part of the city where people of color were allowed to live, is also home to the majority of its 211 payday stores. The same racial pattern also emerged in Tucson, the state’s second largest city.

On July 1, 2010, the state of Arizona will sunset payday lending. The successful pro-consumer campaign that won a voter mandate in 2008 and survived two legislative attempts in 2010 was recently but cautiously celebrated.

According to Bis­hop Henry L. Barnwell, pastor emeritus of First New Life Baptist Church in Phoenix, “It was a people’s victory, supported and fought on moral high ground. It was a victory supported by several members of the valley’s clergy, who spoke to the immorality of 400 percent interest rates.”

“The payday industry and its supporters,” concluded Rev. Barnwell, “are now demonstrating a disregard and disrespect for the will of the people.”

Bishop Barnwell is absolutely correct. There is something terribly wrong—and immoral—about an industry that celebrates financial success on the backs of cash-strapped Black and brown people.

It is also an industry that smears the credibility of reputable businesses that practice a different kind of commerce. When fair prices match with clear transactions, both businesses and consumers benefit. Real economic development brings convenient and accessible services and products that together enhance a community’s quality of life.

Wherever payday lending occurs, however, the effects are more akin to economic deprivation. Through its downward spiral of debt, customers have less disposable income and more cash flow problems as dollars usually dedicated to daily living are redirected to pay interest and fees.

While communities of color need and deserve sustainable economic development, it is painfully clear that payday lending detracts rather than contributes to our quality of life.

(Charlene Crowell is the Center for Responsible Lending’s communications manager for State Policy and Outreach. She can be reached at:

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