Monday, October 8, 2012

Payday Lenders' Locations are No Accident

On Tuesday, I'll be headed to Austin to testify before the Business and Commerce Committee, chaired by State Senator John Carona. This interim committee hearing will focus on the payday and auto title loan industry. More about that after I return.

In the meantime, Tod Robberson has an excellent article on the industry and how it targets certain neighborhoods. This is a continuation of a piece Tod's written on ACE Cash Express' role as a major donor to Congressman Pete Session.

The column has interactive maps which show the impact of the predatory intent of this industry and its strategic clustering in communities with high concentrations of apartment complexes throughout Dallas.

"These lenders aren’t, as Sessions argues, merely companies out there to help people who can’t get credit and are undergoing hard times. They aren’t, as he argues, just there to tide people over till their next paycheck, so they can take care of a few bills and keep their electricity turned on. These companies do essentially what I’ve done with these maps. They study the economically weakest, most vulnerable urban neighborhoods."

"They dissect the demographics, particularly with an eye toward finding high concentrations of residents with low educational attainment and a far-below-average command of the English language. Why is that important? Because those are the people least likely to have a bank account or to understand the process of obtaining a bank loan. They are likely to be fearful of any entity that might ask for an ID that might expose immigration status. If they have low educational attainment, they are less likely to have read up on the high interest rates charged by payday and title lenders. They are less likely to have considered the longer-term debt consequences of the easy-money offerings these stores make, or to consider that if they miss a payment on their $300 car-title loan, they could suddenly find themselves without a car or with an exorbitant bill because their effective interest rates could skyrocket under the terms of the loan."

"So how do they locate these neighborhoods so the lenders can figure out where to open their stores? The U.S. Census and American Community Survey is the first place to start. Using various online mapping tools, you can identify where are Dallas’s highest concentrations of apartment dwellers. People with poor English skills and low educational attainment are significantly more likely to live in rental property than own their own homes. The lower the value of housing, the more likely this housing will contain people living on the edge financially. They represent a rich trove of future payday loan customers. Likewise for people with low disposable incomes. If their incomes barely cover their monthly bills, then all it takes is one little problem — a hospital bill, a car accident, etc. — to push them into insolvency. Fertile turf for payday lenders. Finally, look at the parts of town where the highest concentrations of Latinos live. Sure enough, that’s where you’ll find the highest concentrations of payday lenders."

Ann Baddour of Texas Appleseed, a public interest, public policy and advocacy group based in Austin, Texas, Rob Norcross, lobbyist for the payday loan industry and I, recently taped an episode of the local PBS talk show 'McCuiston', which will be aired soon. I'll let you know when it airs...

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