[Johnjonjoan]

"What’s more, consumer advocates point to studies that show Black and Latino communities are disproportionately targeted by providers of high-cost loans.

In Johnson’s home state of Michigan, areas that are more than a quarter Black and Latino have 7.6 payday stores for every 100,000 people, or about 50% more than elsewhere, according to data collected by the Center for Responsible Lending."

Is this not the same as saying Asian communities are disproportionately targeted by stores selling Asian produce? It's just basic supply and demand right?

We like to make out that some practices are predatory but both sides of the deal agree to the terms. Doesn't this mean they both think what they are recieving is of greater value than what they are giving? how is that predatory?

[colejohnson66]

Supply and demand doesn’t preclude one’s actions from being predatory. And just because one agrees to a contract doesn’t mean they understand what’s in it. Payday loans are extremely predatory and hide the extreme interest rates as best they can. Not to mention the fact that when one is desperate, they do what they can to survive at the moment, ignoring the consequences of the future.

[Johnjonjoan]

To clarify the supply and demand argument was merely describing their abundance in these communities not arguing against their predatory behaviour.

By insinuating they are predatory you imply they are taking advantage of the consumers. If that's the case why isn't another company charging a more reasonable amount thereby taking over the entire market and making money?

Furthermore what's the alternative to consumers not having these loans available? It could be that they lose their car, causing them to lose their job, then their home.

Edit: I often see claims they hide their interest rate, but why would they advertise a yearly rate when the loans are intended for durations of weeks? It's like complaining that petrol isn't priced by the kilogallon.

[jjeaff]

Advertising a yearly rate would make it more recognizable as an exorbitant rate. Though, in the same vein, banks should also disclose similar data for their "fees".

Kind of like how grocery stores like to sell two different sizes of a product and give you the price per ounce on the first, but only price per pound on the second. Makes it difficult to compare. They are hoping you will choose the larger, even though it is often more expensive per unit.

As for why someone doesn't come in and sweep the market with lower prices, that's because price is hidden. So how could a competitor undercut the price when it is difficult to compare?

But i actually don't think the payday lenders are the real problem. My guess is that they have pretty high default rates and I would be interested to see what their average margins are. The real issue is that there isn't a better option, perhaps created by regulation to better serve poor and under banked communities. Provide that, and the payday lenders will disappear overnight.

[snypher]

Asian people could shop at other stores if they wanted to, but Black people may have/historically have had reduced access to 'conventional' credit.

[Johnjonjoan]

Yes I agree. Some reasons for reduced access to credit are smaller loans which fixed costs dig deeper into, shorter loans which entail a lower duration of interest, and the higher risk of default.

Conventional credit would rather not touch this lending because it sees lower hanging fruit.

To me this explains why payday loans have higher interest without being any more predatory than other profit seeking enterprises.