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.

13 thoughts on “Payday Lenders Target Colorado’s Minority Communities with Loans and Lobbying”

sxp151 says:

October 8, 2009 at 3:59 am

From the last link:

“How about a thank you? How about, ‘Thank you, Mr. Green or Mr. Check Casher or Mr. Payday Advance Store for helping me out when I was in a time of need?'” says Willie Green, who owns three payday stores. He’s a former wide receiver for the Carolina Panthers. But now, he’s on the board of directors of the national payday trade association, and is a lobbyist for the industry.

“Thanks for 400 percent?” asks Pelley.

“No, it’s wouldn’t have been 400 percent if she came in on time,” says Green.

“Fifteen percent in two weeks becomes 30 percent a month, becomes 400 percent a year,” says Pelley.

“That is correct, if you had a person taking out 26 loans a year, but that’s not the case,” says Green. “The average person only used this service 7.9 times a year or 6.9 times a year. So you don’t have a person coming in week after week after week after week.”

What total stupid bullshit. Any lender should be legally obligated via truth-in-lending acts to annualize an interest rate. The whole point of businesses like this is to prey on people with little information by disguising the terms. 15% in two weeks is a 3680% effective annualized rate since 1.15^(26) = 37.8.

If you got a bank mortgage at 6% and paid it all off in 2 weeks, you would have paid 0.2% of the principal. But the bank is not allowed to claim 6% interest is 0.2% interest because that’s called lying.

Payday lenders are the scum of the earth.

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1. sxp151 says:
  
  October 8, 2009 at 4:05 am
  
  if I’m doing this calculation correctly. If you pay back NONE of the loan or the interest and just keep getting new checks, then my computation of the interest rate is correct, but if you keep paying off all the interest and none of the principal then your number is correct (since it assumes no compounding).
  
  Do the payday companies let you keep getting cash if you don’t pay the fees every two weeks? Because if so then the interest rate is much higher than you or 60 minutes is reporting. But I might not be understanding it correctly.
  
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  1. Phoenix Rising says:
    
    October 8, 2009 at 11:24 am
    
    Still, at 400% annual interest, it’s still obnoxious and robbery by another name.
    
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MADCO says:

October 8, 2009 at 6:24 am

if he can find a payday lender who believes.

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Half Glass Full says:

October 8, 2009 at 7:39 am

We had anti-usury laws for decades. Suddenly they’re all gone? Get ’em back on the books, and enforced!

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1. Phoenix Rising says:
  
  October 8, 2009 at 11:20 am
  
  As of 1980, the Federal government effectively overrode state usury laws for any federally chartered institution.
  
  And many state laws don’t cover payday lending practices.
  
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Robert Jordan says:

October 8, 2009 at 8:33 am

Interesting that over the past 18 months in financials, it has been the little payday lenders who actually priced risk correctly.

Hopefully they can continue to provide financial services to underbanked communities where the larger institutions won’t dare lend money.

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allyncooper says:

October 8, 2009 at 4:18 pm

Minorities were targeted by the subprime mortgage outfits, and unless you’ve been living in a cave the last 18 months you know the result there.

If you analyze the greatest drop in property values in the Denver metro area by submarkets (which I have), you find the highest foreclosure rates and drop in property values have occurred in diverse areas with higher concentrations of minorities, like Green Valley Ranch, Montbello, and the northeast Denver area in general.

When the values drop that much (20% to 30% and more), so many more people go “upside down” with their loans that they simply walk away.

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BurnerLee says:

October 8, 2009 at 8:46 pm

an email from the Bell was forwarded to me by a friend who knows how much I care about this issue. I’ve seen a few peoples lives destroyed because of payday lending. It is an industry that has no integrity or benefit to society. The fact that they’ve been able to escape SENSIBLE regulation is a travesty. I sincerely hope this becomes an issue in the elections and that legislators will take action against these predators.

No reasonable person can support payday lending. The only results from payday lending are long-term degradation to the community and short term profits to the lowest and most greedy among us.

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1. Danny the Red (hair) says:
  
  October 8, 2009 at 8:58 pm
  
  http://192.70.175.79/State/
  
  if you don’t know who it is, look them up.
  
  To me this is a litmus test issue.
  
  The payday lenders are pouring buckets of money on this issue, poor people are pouring none.
  
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  1. BurnerLee says:
    
    October 8, 2009 at 9:08 pm
    
    it’s so easy to feel alone. There is so much shame involved in this because the person who takes out the loan and then defaults because of all of the unreasonable fees etc., is looked upon as irresponsible. Thank you for this info and I will contact my representatives.
    
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BernardT says:

January 15, 2010 at 6:25 pm

Nice job guys, but it is not only about payday lenders. People must understand that it will be difficult to repay such kind of loan. I mean sometimes people are blind, they are taking huge loans and then they are crying because no money is left. That’s why the crisis has started. But never mind. It is nice that you are fighting with lobbying because it is really powerful nowadays. Thanks for the interesting article and I will be really waiting for more nice ones from you in the nearest future.

Sincerely,

Bernard Thompson from cash advance loans

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MariaG33 says:

April 2, 2010 at 7:24 pm

I absolutely agree with every single word written in this article. Payday lenders are so rude nowadays, they want to leave people without a cent at all, despite the fact that economical crisis is right here and right now. However I can’t understand one thing too. If these people are so annoying, why do your keep an attention to them? I mean just forget them and that’s all. Don’t take any loans or other stuff and you won’t have any problems at all. Thanks for the interesting post however.

Regards,

Maria Ginston from installment loans for bad credit

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