There are says that cash advance loans lenders purposefully exploit minorities. The idea goes that minorities in poor neighborhoods are preyed upon by short term personal loan providers to get them hooked. Well, there is something about that idea that is common to claims like that about practically anything. The truth is not that simple. Payday loan store location is determined by demand, and more goes into it than just ethnic background. A business which does not base its location, or anything really, along a basis of supply and demand is soon a business no longer. Source of article – A cash advance loans is not a tool of racism by Personal Money Store.
Locating the group of money advance stores
One allegation made towards payday lending is that payday loan companies focus on certain races. They move to areas exactly where that race is targeted. The Center for Responsible Lending released a report that purported payday loan companies in CA clustered in areas in which predominantly African Americans and Latinos were located. Check cashing is accessible in most of these areas. They’re just places financial services tend to be available. Payday loan companies really focus on areas that are urban or rural, have a population younger than 40 mostly and live at the poverty line. This had been shown in a study in 2009 done by Robin Prager. If payday loan companies only lent loans for poor credit to people who could not afford to repay, they would soon be out of business.
Desire establishes location of supply
It isn’t really sound to argue the demographics of the area make the service predatory as the business goes exactly where there is a desire. If that was the standard, marketing to any demographic besides everybody is predatory. This has proven that targeting a minority is considered predatory because you’re giving them what they desperately need. That means the clothing business that offers heavy coats that can withstand temperatures as low as negative 80 degrees is being predatory in Alaska because it isn’t also offered to those in Arizona.
Economics help us with this a bit
Correlations do not necessarily end in trigger and effect relationships. That makes sense. Payday lenders cannot lend to those who can’t pay the money back. This would end in a loss of money rather than a profit and also the merchants would close. The businesses would all die off fast if this were the case. You can find many more facts and statistics reports.
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