Do PayDay Loan Centers Target The Poor?
According to Virginia Delegate Jennifer L. McClellan, "There are over two payday lending stores for every McDonalds in Virginia and three for every Starbucks."
The thought of washing down a Big Mac with a chai was too appealing to ignore, so we mashed up Richmond, Virginia's 1990-2000 Poverty Statistics by Census Tract along with Payday loan center locations. * Click to enlarge.
Richmond payday centers seem to roughly prefer to sit on the edges of areas with 15-30% poverty. People got to have a paycheck to give them an advance on, with 177% interest.
If a worker is short of cash and gets their full next paycheck advanced to them, how are they ever supposed to catch up?
With a windfall investment, or perhaps, another loan. — BEN POPKEN
* Combining 2000 poverty data with 2007 addresses is, admittedly, less than ideal, but it was the best we could get our hands on.
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Comments:
Maybe I'm missing something but it appears to me that there are far more payday loan centers in the yellow and green areas then the red and orange.
yeah-- but that's based on where they live, not where they work. payday places will set up the way grocery stores do these days: along target customer travel routes.
24fan24:
Gotta have a paycheck to get your payday loan, therefore choosing high poverty areas aren't in their best interest. Right on the yellow-- itchy but not quite diseased-- is where they seem to like it. :>
I live in Richmond, VA. They are everywhere and they are usually in low income areas. They take over pretty much any closed business and open up shop. It's crazy. It's like they popped up overnight once they passed the bill allowing them here.
note that they are pretty much on major arteries in and and out of downtown.
somone should do a "center of gravity" map like the one gothamist linked to here: http://www.gothamist.com/archives/2006/01/17/map_of_the_da... They did it for where the center of the starbucks universe is in manhattan.
kos
Well I would say less educated, not less rich. The two just happen to overlap quite a bit.
177% interest? I didn't even think that was legal. I hope there's a missing decimal point.
In other news, lunchtime sandwich joints are built near office buildings. What an outrage. There oughta be a law....
They disguise the interest as "fees." And yes, they really do charge that much.
@Panhandler
The last time I checked lunchtime sandwich joints weren't bilking people out of much more food than they offer them. Payday loan places are designed to screw the people with the biggest money problems out of the most money. There should be a law.
A fee of $6.81 on a loan of $100 payable in two weeks equals 177% interest.
PayDay ain't the only game in town. There are tons of check-cashing joints in my area that are no-name, one-off stores.
This map is incomplete and misleading at best.
177% APR would be a bargain at a payday lending center. It's more like 300-1,000% APR at many. However, the concentration in less-than-affluent neighborhoods should be unsurprising for the same reason that you won't find an Aldi grocery store in an upper-middle-class neighborhood. Lack of customers.
Payday lending is a "subprime" market for unsecured and risky credit. There are few subprime borrowers in wealthier neighborhoods, where people have the credit score to get, say, a credit card with a bargain rate of, say, 19% APR.
Ahhh, what a relief. I read through the comments expecting to see at least one "buyer beware" or similar asshole remark (notwithstanding that sandwich shop load of bullshit). Thank you, Consumerist commentators, for restoring my faith in...well...Consumerist commentators.
bndocksnt - I was thinking the exact same thing. I was reading them like I was about to see a car crash, and it never happened. Yeah for Consumerist commentators.
I'm not going to be a "buyer beware" commenter as I have never used one of these loans. But could there be some necessary uses of these places for people living in poverty? I mean, if people need cash, soon, what other alternative do they have? Are we talking caps on fees or eliminating the business altogether?
It's like people who pat themselves on the back for closing down a child labor factory overseas. Well, what of the children now? I mean, presumably their family didn't suddenly become able to support them if they couldn't before. So how is the family supporting the children now?
Kornkob beat me to it. These places don't open up shop in the most poor places because they don't want to be robbed, but they will setup in places where the people heading from work to home in poor places have to go through. I see it all the time.
And I admit I did use one of these places once when I was desperate and had credit card balances to my eyeballs. But only once and I paid it off immediately. They kept trying to persuade me to take a little more money and take a little bit longer to pay it off. Yah! I was desperate, not stupid!
Not exactly the poor I suppose the middle income group is the one being targeted by these lenders. Actually this group is basically working people so they can easily put their job as a guarantee for the loan they borrow. So its easy from the lenders point of view..
I can see that they choose less affluent neighborhoods just by walking around. It's the same as currency exchanges and liquor stores. Any place where people are less likely to have a checking account and/or a drinking problem all three of those (plus title loan stores) pop up. They have no need for people with a high income or those with no income, but love everyone who lives paycheck-to-paycheck.