Predatory Profiling: The Role of Race and Ethnicity in the Location of Payday Lenders in California

Wei Li; Leslie Parrish; Keith Ernst; Delvin Davis

doi:10.2139/ssrn.1531333

journal article Open Access Jan 01, 2009

Predatory Profiling: The Role of Race and Ethnicity in the Location of Payday Lenders in California

Wei Li

Leslie Parrish Keith Ernst Delvin Davis

SSRN Electronic Journal · Elsevier BV

View at Publisher Save 10.2139/ssrn.1531333

Topics

No keywords indexed for this article. Browse by subject →

References

38

[1]

required enhanced disclosures of fees, including APR, but did not change the maximum fee or loan amount

[2]

California Deferred Deposit Transaction Law, Division 10, Sec. 23036 of the California Financial Code

[3]

"According to an analysis by the California Reinvestment Coalition, the five lenders with the most locations in California include Advance America" Annual Report (2007)

[4]

"Using a database of a large Texas-based payday lender, Paige Skiba and Jeremy Tobacman found that African Americans (who make up 11 percent of the total adult population) made up 43 percent of payday borrowers and Latinos (who make up 29 percent of the total adult population) made up 34 percent of payday borrowers. See Table 1 of Paige Skiba and Jeremy Tobacman. Do Payday Loans Cause Bankruptcy?" See Payday Advance Customer Satisfaction Survey (2000)

[5]

Brian K Bucks "Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances" Federal Reserve Bulletin (2006)

[6]

Payday Loans: Taking the Pay Out of Payday (2008) 10.4016/34928.01

[7]

democratization of credit" was largely coined by Alan Greenspan as Chair of the Federal Reserve to describe the innovations in the financial services industry that expanded access to credit to previously un-or under-served households. However, Greenspan did note the danger of excess. For an example of Greenspan's views, see Consumer Credit and Financial Modernization, a speech given on October 11, 1997 at the Greenlining Institute

[8]

Donald P For Example Strain conclude in Payday Holiday: How Households Fare after Payday Credit Bans that the ban on payday lending in Georgia and North Carolina has led to increased bankruptcy filings, bounced checks, and FTC complaints

[9]

See North Carolina After Payday Lending: Attitudes and Experiences with Credit Options, University of North Carolina Center for Community Capital (2007)

[10]

Delvin Davis "Race Matters: The Concentration of Payday Lenders in African-America Communities in North Carolina" Center for Responsible Lending (2005)

[11]

Ibid 10.2307/j.ctt207g8bt.22

[12]

L Mark "Factors Affecting the Location of Payday Lending and Traditional Banking Services in North Carolina" Review of Regional Studies, Fall (2004)

[13]

Assaf Oron Easy Prey: Evidence for Race and Military Related Targeting in the Distribution of Payday Loan Branches in Washington State (2006)

[14]

Generally underbanked" is used to describe a person who has a checking account but, rather than or in addition to using other mainstream financial products, they regularly use alternative products and services such as check cashing and payday loans. For an overview of the preferences and challenges of underbanked consumers see work the Center for Financial Services Innovation (www.cfsinnovation.com) such as The CFSI Underbanked Consumer Study: Underbanked Consumer Overview and Market Segments Fact Sheet (2008)

[15]

"A survey of California payday borrowers found that the leading way a borrower chose their payday lender was that they "saw a pay-day location and went in," as noted by 24.4 percent of respondents. See.Table 25 on page 44 of 2007 Department of Corporations Payday Loan Study" Applied Management & Planning Group (2007)

[16]

Matt Fellowes Banking on Wealth: America's New Retail Banking Infrastructure and Its Wealth-Building Potential (2008)

[17]

For demographic data on payday borrowers, see Payday Advance Customer Satisfaction Survey (2004)

[18]

IO Data Corporation (2002); and Advance America 10-K SEC filing for the year ending (2007)

[19]

"% non-English speakers" explains 7.3 percent of the proximity of banks and 15.6 percent of the clustering of banks among neighborhoods. There are several potential reasons for this discrepancy. First, non-English speakers are likely among the most recent immigrants to California from other countries, making up only a segment of our African American and Latino population overall. Second, "non-English speakers" captures a variety of races and ethnicities in addition to African Americans and Latinos" While race and ethnicity are not important explanatory factors for bank branch location, the variable

[20]

The CFSI Underbanked Consumer Study: Underbanked Consumer Overview & Market Segments Fact Sheet. Center for Financial Services Innovation (2008) 10.1108/jfep-09-2018-0125

[21]

Payday Advance Customer Satisfaction Survey (2004) 10.1016/s0377-2217(03)00028-6

[22]

"A survey of California payday borrowers found that the leading way a borrower chose their payday lender was that they "saw a pay-day location and went in," as noted by 24.4 percent of respondents. See.Table 25 on page 44 of 2007 Department of Corporations Payday Loan Study" Applied Management & Planning Group (2007)

[23]

Marsha In Consumer Literacy and Credit Worthiness. (n.d.), the authors find that African Americans correctly identify that they have good credit 65 percent of the time, compared with 76 percent of the time for whites and 74 percent of the time for Latinos

[24]

41 percent of California payday lenders noted that "they offered some type of bonus to consumers who referred other customers to their locations (2007)

[25]

"A survey of California payday borrowers found that the second most important reason a borrower chose their payday lender (after convenience) was through a "word of mouth" referral by a friend of relative. See.Table 25 on page 44 of 2007 Department of Corporations Payday Loan Study" Applied Management & Planning Group (2007)

[26]

Edna R Sawady "Financial Decision Making Processes of Low-Income Individuals" The CFSI Underbanked Consumer Study: Underbanked Consumer Overview & Market Segments Fact Sheet. Center for Financial Services Innovation (2008)

[27]

"generally [payday loan borrowers] knew the dollar fee per $100 borrowed but were much less clear on the APR. In one study, 96 percent of respondents could report the finance charge per $100 borrowed, but only 16 percent could report an APR, and 60 percent of those were probably wrong, including 41 percent who reported an APR below 30 percent" As noted by researchers summarizing various survey of payday borrowers nationally in North Carolina After Payday Lending: Attitudes and Experiences with Credit Options. University of North Carolina Center for Community Capital (2007)

[28]

"Mintel Comperemedia which offer free or discounted loans to first-time customers. For example, Check into Cash has a mailer offering a first loan for free, 1-2-3 Cash offers the first $100 of a loan for free" CRL has a variety payday lending advertisements on file collected through

[29]

"the California Budget Project estimates that approximately 1 million Californians took out payday loans in 2006, averaging roughly ten loans per borrower. See slide 5 in Payday Loans: Taking the Pay Out of Payday" California Budget Project (2008)

[30]

"The California Budget Project also notes that payday lenders reported that 84 percent of business is attributable to "repeat customers" according to the 2007 Department of Corporations Payday Loan Study conducted by Applied Management & Planning Group. See page 2 of Recent Reports on Payday Lending Should be Used with Caution" California Budget Project (2008)

[31]

North Carolina Consumers After Payday Lending: Attitudes and Experiences with Credit Options. University of North Carolina Center for Community Capital (2007)

[32]

For more details, see Report on the Implementation of Limitations on Terms of Consumer Credit Extended to Service Members and their Dependents. Department of Defense (2008)

[33]

"A survey of California payday borrowers found that 50 percent took out a payday loan to pay other bills, 22 percent used the funds to cover household needs such as groceries, and only 10 percent take payday loans only for emergency situations. See Table 28 at page 47 of 2007 Department of Corporations Payday Loan Study" Applied Management & Planning Group (2007)

[34]

Non-credit strategies reported to be used by households facing financial shortfalls in North Carolina include working with a creditor to renegotiate a debt or pay a few days late, borrowing from friends, family, or an employer, or receiving assistance from a charitable source. See North Carolina Consumers After Payday Lending: Attitudes and Experiences with Credit Options (2007)

[35]

Jean Ann Testimony Of Director of Consumer Protection, Consumer Federation of America before the Subcommittee on Domestic Policy of the House Committee on Oversight and Domestic Reform (2007)

[36]

Californians living or working in 28 counties across the state are eligible for membership. In addition, BBVA Bancomer USA, a bank with 30 locations primarily serving California's Latino households, is part of the FDIC's small loan pilot program. Banks participating in this program offer small loans costing no more than 36 percent APR with a built

[37]

R W Sinnott "Virtues of the Haversine" Sky and Telescope (1984)

[38]

I Kleinschmidt "Use of generalized linear mixed models in the spatial analysis of small-area malaria incidence rates in Kwazulu Natal, South Africa" American Journal of Epidemiology (2001) 10.1093/aje/153.12.1213

Cited By

9

POCO A POCO: POST-FLOOD SURVIVAL IN THE COLONIAS OF THE RIO GRANDE VALLEY

Lucas Belury · 2022

Geographical Review

Metrics

9

Citations

38

References

Details

Published: Jan 01, 2009

Authors

W

Wei Li

North University of China

Cite This Article

Wei Li, Leslie Parrish, Keith Ernst, et al. (2009). Predatory Profiling: The Role of Race and Ethnicity in the Location of Payday Lenders in California. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1531333

Predatory Profiling: The Role of Race and Ethnicity in the Location of Payday Lenders in California

You May Also Like