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.
At the 2016 NCLR Annual Conference in Orlando last month, NCLR staff was out in full force collecting comments from attendees in support of the Consumer Financial Protection Bureau’s proposed rule to curb payday lenders’ abusive lending practices.
As we’ve highlighted in our Truth in Payday Lending series, the Latino community has especially fallen victim to these shady operators. In the absence of safe and affordable financial products, people desperately in need of cash turn to payday lenders, who prey on our communities. Promising relief, these payday lenders lure struggling Latinos into situations that quickly morph into an endless cycle of borrowing and debt.
The American public has a very low opinion of payday lenders, says a new poll out from the NCLR Action Fund, Americans for Financial Reform, Center for Responsible Lending, and the NAACP. The poll, which comes on the heels of a proposed Consumer Financial Protection Bureau rule to reign in predatory lending, shows Americans see little value in the services payday lenders provide.
The poll, conducted from May 26 to June 1, 2016, surveyed 1,400 registered voters and found that payday lenders represent some of the least popular institutions around. Of those surveyed, only 3% had a favorable opinion compared to a 51% unfavorable rating. This makes them less liked than used car salesmen.
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.
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.