Payday Loans Do NOT Target Minorities

The Competitive Allegation

Graffiti of President Obama

A recent Associated Press article by Stephen Ohlemacher entitled “Despite Obama’s Election, Stubborn Racial Disparities Exist” brings to mind a common misconception banks, credit unions and the media have about companies that specialize in payday loans: that they target poor people and minorities.

Witness America in its post-Obama election glow

(As a means of setting the scene for the racial group pay day loan companies supposedly exploit…)

Now that a black president has been elected, has racism or racial discrimination been wiped away, as if a magic wand was waved on November 4?

Certainly, Obama’s election has generated excitement among black Americans. After generations of struggling for equality, many see a light at the end of the tunnel. Yet when the facts are absorbed, it becomes clear that racial disparities persist.

Ohlemacher cites Kari Fulton, a 23-year-old black activist who worked to register and turn out young black voters in the presidential election. Fulton admits that “Election Day was just the beginning. People don’t expect President Obama to be a superhero. We have to solve our own problems.”

The problems are indeed significant

Here are some sobering facts the AP reporter relates about the current playing field for African-Americans… similar numbers hold true for other minority groups in America:

• About a quarter live in poverty – nearly three times the rate for whites
• Black adults are less likely than whites to have college degrees and more likely to be in prison
• Blacks are less likely than whites to have health insurance and, on average, they don’t live as long as whites
• The income gap between black and white has barely changed in 30 years, with a typical black household making only 62 percent of the income of a typical white household

National Urban League President and CEO Marc Morial is well aware of the disparity. His civil rights group publishes a book called “The State of Black America” that points this out in cold, hard numbers each year. He told Ohlemacher that “a mere election does not change the abject conditions for African-Americans or the 230-plus years of racial injustice.”

Obama himself has admitted that “we have a long way to go.”

It is true that Obama’s campaign inspired young blacks to vote and get involved in the campaign. The efforts of young activists like Kari Fulton play no small role in this. Lobbying government for more jobs in poor neighborhoods and better, more affordable health care are not only issues that Obama is deeply concerned with for all people, but issues that he encourages everyone to work toward.

Are African-Americans or other minorities targeted by payday loan companies?

Socioeconomic equality for African-Americans is not yet the standard in America. That being the case, critics of payday loans are quick to jump on the idea that consumers in economic straits such as theirs supposedly will have low credit scores. Consumers with low credit scores, critics assume, will jump at the chance to obtain unsecured credit when financial need comes knocking. Thus, they also assume that payday loans are aimed squarely at such consumers, in order to trap them in a “cycle of debt.”

Yet the evidence does not support this. Groups like the Community Financial Services Association (CFSA) have brought together clear outside research which indicates that no fax payday loan customers come primarily from America’s middle class. In other words, hard-working adults who may fall just short of having savings or disposable income to fall back on in an emergency.

Here are some of the findings presented to the CFSA:

• Most no faxing payday loan customers earn between $25,000 and $50,000 annually
• Sixty-eight percent are under 45 years old; only 4 percent are over 65, compared to 20 percent of the population
• Ninety-four percent have a high school diploma or better, with 56 percent having some college or a degree
• Forty-two percent own their own homes
• The majority are married and 64 percent have children in the household
• One hundred percent have steady incomes and active checking accounts, both of which are required to receive a payday advance

If you’re curious who reported these findings to the CFSA, just click the link below. It’s The Credit Research Center, McDonough School of Business, Georgetown University, Gregory Elliehausen and Edward C. Lawrence. Payday Advance Credit in America: An Analysis of Customer Demand. April 2001.

When it comes to payday loans, critics frequently miss the mark. Consumers from all walks of life who appreciate quick, discreet, convenient cash assistance during a financial snafu use them. If anything, the media should turn their attention to organizations that badly take advantage of the public trust and defraud consumers, like this well-known bank. That’s where media outrage should be directed.