Usury Country: Payday Loans Pushing Millions of Middle Class Americans Deeper into Debt ... 80% caught in a debt trap

Democracy Now! | Usury Country: Payday Loans Pushing Millions of Middle Class Americans Deeper into Debt

Lawmakers and public officials in California, Ohio, South Carolina, Missouri, Washington and other states are attempting to crack down on the controversial practice known as payday lending. Payday loans are short-term loans or cash advances secured by a post-dated check. The annual interest rate for these loans can be as high as 400 percent, ten times the highest credit card rates. Today, it’s a $40 billion industry with more than 22,000 stores. We speak with journalist Daniel Brook about his Harper’s Magazine article, “Usury Country," and with Ginna Green of the Center for Responsible Lending. [includes rush transcript]
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AMY GOODMAN: In the early ’90s, there were fewer than 200 payday lending stores in the country. Today it’s a $40 billion industry with more than 22,000 stores. There are more payday lending stores than McDonald’s and Starbucks combined. As more Americans are living paycheck to paycheck, the demand for payday loans is increasing.
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... You would go to a payday lender. You’d write out a check for, say, $230, and they’d give you $200 in cash right then. The check, you know, would be bad, and it would be dated to your next payday. Then, when your next payday rolls around, you’re supposed to reappear at the payday lender and buy your check back in cash for the full $230 value.
Now, on the face of it, it already sounds like a high-interest loan, but it’s typically much worse than that, because the percentage of borrowers who, when their payday comes around, are able to pay it off is very small. I mean, even industry-sponsored research shows that only a quarter of borrowers are able to consistently pay off their payday loans when they come due at the end—at their first pay period. State research shows rates in the 70s or 80s or close to 90 percent of borrowers can’t pay these off. So it’s clearly a debt trap.
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And even after we account for factors like income, education, poverty rate, we find that they’re still 2.4 times more concentrated in African American and Latino neighborhoods. I think this research has borne out what many people have thought we’ve known intuitively, that payday loans appear to really cluster in black and brown neighborhoods. ,,,