According to a report by the Center for Responsible Lending, payday lenders are approximately eight times more concentrated in California’s Latino and African-American neighborhoods. These companies drain these communities of approximately $247 million each year in payday loan fees. The Center for Responsible Lending states that regulation should be enacted in California that caps the interest rates on these payday loans to try and stop abusive payday lending.
“Payday lenders contend that they provide access to credit for under served communities,” said Leslie Parrish, senior researcher at the Center for Responsible Lending. “What they are really providing is access to long-term debt traps which too often lead to extra overdraft fees, credit card delinquency, trouble paying bills including medical expenses, even bankruptcy.”
The report stated that on average the nearest payday lender is almost twice as close to the center of an African American or Latino neighborhood as a mostly white neighborhood. It also said that race and ethnicity play a far less prominent role in the location of all other banks and financial institutions.
“Payday loans are a debt trap — and in California, that trap ensnares more African Americans and Latinos by a staggering margin,” said Ginna Green, spokeswoman for the Center for Responsible Lending’s California office. “The only solution that springs the trap is a comprehensive, small-loan rate cap that covers all small-dollar loans. California’s payday lenders don’t deserve to be above the laws that regulate their competition.”
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