My GIS II group just presented our term project last night. The topic was payday lending in the Portland Metro area, and our timing couldn’t have been more perfect. The same day as our presentation, the Willamette Week cover story was on the booming payday lending industry in Oregon.
Our project followed a study by Dr. Steven Graves that compared the economic and demographic characteristics of neighborhoods with payday lenders and the surrounding community as a whole. The purpose was to identify if there was any significance to the claim that payday lenders target poor and minority neighborhoods. His study found this to be true in urban Cook County, Illinois and Orleans Parish, Louisiana. We were curious if the same pattern existed in Portland.
We compared census tracts with payday lenders to all census tracts in the metro region to see if there were any significant difference between several economic and demographic measurements. Our results? Payday lenders are located in significantly poorer neighborhoods, and in neighborhoods with a higher Hispanic population. There’s more, but that’s the relevant bit.
Our project was really just the start of what could and should be a larger examination of an unsavory business practice. One obvious problem with our research is the proximity of lenders to high-traffic arterials (82nd, 99E, 99W, Powell, Farmington Rd. etc) which is usually zoned commercial. Potential for a thesis topic? maybe….
update(s): The maps disappeared for some reason. Now they’re back.
The same is true of military towns, since they are filled with guys like Tom who have to have the newest and greatest toys. Unfortunately military incomes are substantially less.
“Our project was really just the start of what could and should be a larger examination of an unsavory business practice.”
Is it really unsavory or just good business planning? I’m not saying I like the results but it seems to me that their target demographics are going to be communities where people are living paycheck to paycheck rather than righie rich neighborhoods. But then the question is…does their business model perpetuate/cause the problem or has the problem always been there and now people have a way of helping themselves out of a financial crisis (i.e. utilities being shut off) if used correctly?
Of course the interest rates (as shown in your presentation) our just ridiculous! And I do have to say that your data showing that there is targetting of minority groups was startling.
Interesting study none the less. Nicely done!
You’re absolutely right that it makes sense to locate near your clients. The issue isn’t so much that they’re picking good location – it’s actually in their business model, which I can’t really think of anything else to liken it to than feudelism. It’s a really tough call because for many a payday loan is the difference between feeding their children and not, but this usually kicks off a perpetual cycle of indebtedness from which many folks can’t escape. Since these places aren’t currently regulated in many states, folks get trapped.
It’s odd – this is about as basic as a free market economy gets – but it’s also the worst example of it (in my opinion).
Matt – recently Florida passed a cap on (effective) interest rates on loans to military families at 45% or so. It’s a start.
Oddly enough – there’s a bill in Mass. right now that may allow Wal-Mart to offer payday loans inside the stores! As if Wal-Mart didn’t milk their employees enough – this would be the final piece to create the perfect indentured servants. Your employees get payday loans because they have measly wages to buy food staples. Forever.
On second thought – it’s possible that Wal-Mart could really bring the payday lending standard up a bit.
Wow. Isn’t this really no different than credit card debt, though? And, hell, those things come straight to your mailbox without you asking! It’s funny that Matt mentioned me and having to have the lastest toys and navy towns because I am probably the only one in our group who has actually gone to one of these places. It was in Oak Harbor and it was in order to buy that Porsche that I had. I was still waiting for my insurance check from the CRX in the mail and the guy was talking about how he had two million other people showing interest in the car, so in order to make sure it wasn’t snatched out from under me, I went to Money Tree or one of those. I think the fee was something like $300 for a $6600 one week loan, so that probably fits that super high rate formula quite nicely.
I am a FOOL!
I’m telling you: growing up listening to hip hop and playing basketball, being poor, getting payday loans, pimping my rides, overspending, having a huge schlonger… How is it that I’m white?
I agree that the credit card companies are making a killing praying on poorer people, college students, etc. The difference with credit cards, however, is that their interest usually tops out at the 20% rate (still absurd, but managable). The payday loans are in the 300% ranges (though they always try and complain that it isn’t applicable to them because they are such short term loans, so they should be able to advertise their loans at 30% (for one month)).
It seems like on top of setting a cap like Florida, debt management classes should be made more readily available. We could tax the short term loan places and make it free to the public or something. I agree with Andy that its a perpetual cycle that many people will never get out of and the best way to aid in that is through knowledge rather than just a cap.
Even at 26% interest – you can pay a long time and never get out from under a credit card debt. That’s why it’s so profitable.
GeddyT, Do you “use” meth too? Do you live in a trailer? If so, it just sounds to me like you’re a cracker exaggerating your pecker. :)