DURHAM, N.C., March 22 /PRNewswire-FirstCall/ -- Payday lenders who trap
people in triple digit-interest loans locate their stores in African-American
neighborhoods in higher concentrations, according to a report by the Center
for Responsible Lending (CRL).
African-American neighborhoods in North Carolina have three times as many
payday lenders per capita as white neighborhoods, even after controlling for
variables associated with the industry's purported customer base such as
income and homeownership.
"This study shows in the starkest terms that African-American
neighborhoods bear the brunt of predatory payday loans -- loans that are not
even legal in North Carolina," said Mark Pearce, CRL president. "This
confirms that the abusive loans made by payday lenders are not just an issue
of fair and responsible lending, but are a civil rights issue as well."
Payday lending is illegal in North Carolina, but large national chains
such as Advance America, Check 'n Go and Check Into Cash continue to operate
openly by affiliating with out-of-state banks which contend they are exempt
from state law. Nearly 400 stores operate in North Carolina, even though
state law hasn't permitted them since 2001. Currently, the North Carolina
Commissioner of Banks and Attorney General are investigating payday lending
activity.
Because CRL looked at stores owned by the national chains, the CRL report
has implications far beyond North Carolina's borders. Twelve states, in
addition to North Carolina, are subject to rent-a-bank arrangements because
payday lending is not authorized by their state legislatures (Michigan,
Georgia, Pennsylvania, Maine, Arkansas, Massachusetts, West Virginia, New
York, New Jersey, Connecticut, Vermont, and Maryland). In fact, over 3,000
payday loans stores in the country are operating outside of the laws of their
state.
At a typical payday shop, a person short on money before payday borrows,
$255 by writing a postdated check for $300. After two weeks the borrower
often can't repay the principal and writes yet another postdated check.
Ninety-nine percent of payday loans are made to repeat borrowers, despite
industry claims that the loans are for one-time, emergency use only. Advance
America has reported that their average number of loans per borrower was 9 per
year in 2003.
CRL has previously estimated that predatory payday lending costs American
families $3.4 billion annually, a cost that is increasing rapidly as the size
of the market explodes.
The CRL report, "Race Matters: The Concentration of Payday Lenders in
African-American Neighborhoods in North Carolina," along with charts and maps
of all metropolitan statistical areas -- illustrating the clustering pattern
in African-American neighborhoods -- is available from CRL at
http://www.responsiblelending.org.
ABOUT CRL -- The Center for Responsible Lending
(http://www.responsiblelending.org) is a nonprofit, nonpartisan research and
policy organization dedicated to protecting homeownership and family wealth by
working to eliminate abusive financial practices. CRL is affiliated with
Self-Help, one of the nation's largest community development financial
institutions.
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