October 07, 2009 11:17 PM UTC

Payday Lenders Target Colorado's Minority Communities with Loans and Lobbying

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• by: TheBell

(That’s right, payday lenders who spam us at Colorado Pols – we’re comin’ for your ass! Anybody else got an anti-payday lender diary they’d like to write? We’ll promote that diary lickety-split. – promoted by Colorado Pols)

On this site and elsewhere, we have  documented the extreme harm caused by payday loans in Colorado. These predatory products come with very high fees, very short repayment periods and annual percentage rates that top 520 percent. Payday loans are very easy to get — you need a bank account and steady income — but very difficult to repay. Thousands of Coloradans have become trapped in a cycle of debt because of payday lending. Each year, these lenders suck more than $80 million in unnecessary fees from Colorado’s low-income community.

But that’s not the entire story. Equally compelling is the effort by payday lenders to target Colorado’s minority community with their harmful product. A report by the Center for Responsible Lending found that the racial and ethnic composition of a neighborhood is the primary predictor of payday lending locations. Payday lenders are eight times more concentrated in African-American and Latino neighborhoods compared to predominantly white neighborhoods. Not surprisingly, African-Americans and Latinos make up a disproportionate share of payday loan customers.

Julian Bond, chairman of the NAACP, had this to say: “Study after study has demonstrated that payday lenders are concentrated in communities of color.  A drive through minority neighborhoods clearly indicates that people of color regardless of income are a target market for legalized extortion. Payday lending is an economic drain that threatens the livelihoods of hardworking families and strips wealth from entire communities.”

A 2006 analysis of Colorado data found that payday lenders usually target low-income neighborhoods. These communities are often located in urban areas with larger populations and tend to be disproportionately minority.

Payday lenders have not stopped at merely peddling their product in Colorado’s predominately Latino and African-American communities. Now, as they’ve done across the country, payday lenders are hoping plain-old cash will help make the case that payday lending is actually beneficial for people of color.

For months, we’ve heard from many of our friends among area nonprofit organizations that national payday lending lobbyists have been visiting Colorado, checkbooks in hand, hoping that donations will help sway groups that represent minority constituencies. Last month, we got concrete evidence of this. Moneytree became the primary sponsor for the El Grito 5K Walk and Run, Denver’s only Latino running event, formed to celebrate Hispanic Heritage Month and the famous “Grito” of Mexican Independence Day. And the Urban League of Metropolitan Denver announced that Willie Green, former Denver Broncos receiver and current payday lending shill, had presented the league with a $10,000 check from Advance America.

We don’t fault the El Grito organizers or the Urban League for taking the payday lenders’ money. In fact, they should be asking for more. Payday lenders have long exploited economic conditions to strip money from minority communities, and it’s about time they sent some money back. We hope, however, that the payday lenders’ attempt to take advantage of the rough financial conditions faced by Colorado’s nonprofit organizations is unsuccessful.

Times are tough throughout Colorado. But payday loans are not the answer. They are harmful to all consumers and particularly damaging to low-income, minority communities. If you don’t believe us, read what the aforementioned Willie Green has to say about payday lending on 60 Minutes.