Don’t Be Fooled: Payday Lenders Do Target Communities of Color

By Marisabel Torres, Senior Policy Analyst, Wealth-Building Policy Project, NCLR

In response to Javier Palomarez’s article “Alternative Lenders Offer Opportunity for Consumers and Businesses Alike,” he is correct that lower-income American households need access to small-dollar lending. However, I disagree with his support for payday lenders.

What Palomarez’s article fails to mention is that payday lenders specifically target communities of color, and their business model creates a vicious cycle of debt that is difficult for most borrowers to escape. In fact, the typical payday loan carries an exorbitant 391 percent APR, is given to borrowers without consideration of their ability to pay it back, and with direct access to their bank account.

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Truth in Payday Lending: Where We Go From Here

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Over the last several weeks, we have shared with you stories of real people who have fallen victim to the underhanded operating practices of payday lenders, caught in a seemingly endless debt trap.

Often, borrowers are just looking to for extra cash to pay off some bills or to fix their car. Such was the case with Ayde’s story. The Idaho mother of three was badly in need of car repairs so she turned to the only place where she knew she could get cash quickly. Ayde took out loans from three different companies ranging from $700 to $1,000. It’s not uncommon for payday loan interest rates to be as high as 400 percent. She has no idea how many times she has had to renew her original loans and she’s still trying to pay them back. Ayde is buried under crippling debt that has led to bankruptcy, closed bank accounts, and harassing phone calls.

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Google Says “No More” to Online Payday Lender Ads


Payday photo: Payday Loans

Google is the latest enterprise to join the growing chorus of civil rights, consumer, and faith groups concerned with how payday lending companies carry out their lending practices. In a landmark decision today, the technology giant announced that it will ban ads featuring payday lenders. The decision comes just as the Consumer Financial Protection Bureau prepares to issue regulations that would seriously reign in these lenders.

As we have highlighted in our blog series, “Truth in Payday Lending: Stories from Latino Borrowers,” payday lending industry practices have wreaked havoc on millions of consumers. The unsafe financial products they peddle trap consumers, many of them Latino, in a vicious debt cycle that is difficult to get out of.

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Senior Citizen Fixed Incomes Threatened by Payday Lenders

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Our venerated senior citizens shouldn’t have to rely on payday lenders to get by, but it happens all too often, and lenders walk away with their limited, hard-earned dollars. Such is the case of S. McWilliams.

The Boise, Idaho, resident relies on a fixed income that, unfortunately, hasn’t always been enough to meet her needs. In this instance, McWilliams needed some quick cash to pay her bills and to stock up on groceries. The EZ Money store in the city was ready to hand over the funds she needed, but McWilliams wasn’t ready for what happened to her once she accepted them.

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How PayDay Lenders Prey on the Vulnerable


Maria Cervantes knew of the pitfalls of payday lending when she took out her first loan. The hardworking mother of three found herself in need of a new tire for her car, but she didn’t have the money to buy it. Maria found herself up against a wall and went to a payday lender because she knew she could get access to cash quickly. After all, if she couldn’t get a new tire, she couldn’t get to work, and if she couldn’t work, she couldn’t provide for her family. Maria felt she had no choice. She needed to borrow $300, and the lenders were more than happy to give it to her.

That was five years ago. Today Maria owes more than $2,000 and is still struggling to pay that initial loan back.

As has happened to so many others in her position, Maria fell victim to the vicious payday lender debt trap, which has resulted in thousands of dollars in fees, negative credit reporting, and harassment. Unable to pay back the initial loan upon her payday, she was forced to renew it plus pay exorbitant fees. To pay that first loan back, she had to take out another loan from a different provider. Eventually, Maria had three loans out and was paying $45 for each every two weeks, or $270 a month.

“Every time that I thought I was going to pay off the $300 loan, something always happened, so I found myself in a cycle. I regret ever taking the $300 loan.” said Maria in a testimonial.

With her credit in tatters, Maria reached out to an NCLR Affiliate, Montebello Housing Development Corporation (MHDC), for help. Working with MHDC, she has begun eliminating her debt and reestablishing her credit, a process that could take up to two years. She is also working with MHDC to pay off her credit cards one at a time. Maria knows she has a long road ahead of her, but with investment and education, she is putting herself on the path to recovery and warning others of the dangers of payday lending along the way.

“The only good thing this experience has given me is the chance to share my experience with those who are thinking about payday loans or those who want to save for a home,” said Maria.

Unfortunately, Maria’s story is not uncommon, and without regulations in place to rein in payday lenders, more and more low-income communities will fall prey to shady lending practices. That’s why we support the proposed Consumer Finance Protection Bureau rule to reform payday lending. Join us in putting an end to predatory lending so that Maria and millions others like her can share in the American Dream.