Black Community: Are Payday Loans in Blacks’ Best Interest?

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(ThyBlackMan.com) Maybe it’s because of the Bible story from the book Matthew detailing Jesus driving the “buyers and sellers out of the temple” that money lenders are held in such high contempt. Fourteen states and the District of Columbia ban payday loans. Payday loans are a highly-controversial form of credit because as borrowers find fast relief, politicians have entered the fray to oppose these loans’ high-interest rates.

Payday lending’s proponents argue that it is a vital way to help underserved people solve temporary cash-flow problems; opponents claim that the practice preys on overburdened people.
Despite the distain of the intellectuals, payday lending has mushroomed into a $46 billion business. Governments are seeking to institute laws to cap payday operations, a move that could restrict credit and encourage more illegal lending.

Representative Alcee Hastings is becoming a champion to Americans that live paycheck to paycheck. The Democrat from Miami is a heretic among liberals and their efforts to regulate payday lenders. He raises concerns that strict regulations might cut off an essential source of short-term loans. Many Black Americans can’t get help from big banks when they are in a cash crunch between paychecks.

In a Washington Times editorial Hastings said: “It is difficult for many to imagine having to choose between paying the rent on time and purchasing your sick child’s prescription medicine. For these credit-constrained individuals, payday loans provide a financial solution when emergencies or other unforeseen events arise. I know how important these loans can be and have relied on a short-term loan that was the only avenue available to me.”

When a Member of Congress admits to using payday lenders and a high-interest loan to overcome a “bump in the road” it’s time to question paternalistic assumptions associated with payday lending. “We have the cash you need!” is an alluring offer millions of Americans buy into. Instead of assuming the “victim” position on this issue, more Blacks need to consider that payday-loan stores or cash-advance shops are among the financial sector’s fastest growing businesses. Check cashers first appeared in New York in the 1940s as soldiers returning from service encountered obstacles while trying to cash their government checks. Decades later, these businesses have evolved. Aside from their usual check cashing services, they’ve became convenience centers where customers also pay their public service and cell phone bills and buy lottery tickets and phone cards – all in one stop.

No question that check-cashing stores are often in the ire of local politicians but, the “cash in a flash” payday loan industry represents viable business opportunities for entrepreneurial Blacks. In fact, nearly one third of African Americans use financial services like check cashing places which should prompt enterprising Blacks to explore the “cash now” industry through payday loans, check cashing, factoring and/or invoice discounting.

More often than not, these business operations cater to lower income people. These businesses are booming and can be located everywhere these days, from the local strip mall to the Internet. Studies reveal that 5.5 percent of American adults – 12 million people – receive $7.4 billion annually from payday lenders. Twelve percent of Blacks have taken out payday loans, more than twice the number of whites (4 percent).

In the U.S., over 100,000 businesses operate as non-depository credit institutions. Often run by non-Blacks, these businesses employ over 500,000 people and provide gross annual payrolls in excess of $22 billion dollars. People participate in this industry as home-based businesses, or operate out of an office or small retail storefront. This type of business can be a great add-on to services such as travel agencies, tax preparation businesses and mortgage and real estate offices. These businesses also offer factoring, invoice discounting, check cashing, and business financing.

With all the commotion around check cashing services, it’s important to you determine where your head and heart are in the matter. Are you an entrepreneur or victim? Some Blacks will increase their incomes through learning more about America’s payday lending industry as they move past the hype that “check cashing stores exploit poor people,” to see how to serve them.

Written By William Reed

This talented brother is also author of “Who’s Who in Black Corporate America” and available for projects via Busxchng@his.com.

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Mitch Mitchell says:
December 1, 2015 at 11:11 am
Payday loan companies are the scum of the earth. Some of these folks charge upwards of 1000% a week on small loans; that’s outrageous. People need to really think hard before taking out loans like this, especially since so many of the loans are for frivolous stuff. If more folks learned budgeting they wouldn’t put themselves into a place where this even becomes a consideration.
Realman2 says:
November 21, 2015 at 8:45 pm
These quick loan store in black communities are completely dishonest and crooked. My advise is to stay away from them.
Ismael A. says:
November 20, 2015 at 11:54 pm
It’s interesting that you mention the money changers in the Temple. They were sanctioned by its priests to exchange the various currencies of pilgrims into the shekel, which was the only “kosher” currency the Temple would accept. So they would gouge pilgrims in the exchange, then take the few shekels left for the benefit of the Temple. Jesus was outraged that the money that went to the Temple stayed in the Temple, to enrich the religious elite. According to Jesus, that money is meant to enrich the community.
We see the same transaction in poor communities across the nation. While many of our churches do God’s work, there are many take our money and do not. And while those churches are quick to cast stones at the payday lenders, they neglect the needs of people that are compelled to take those loans. It’s not necessarily the church’s role to be a money lender, but they must help advocate for better financial services that are badly needed, and not just simply denounce payday lenders as the root of all financial evil.
Marque Anthony says:
November 19, 2015 at 4:47 pm
First you need to realize we are NOT black. Look at your colors.
What’s sad is that we African Americans are still calling ourselves BLACK because Caucasian oppressors called us that to contrast their color and to assign to us all the negative things BLACK is equated with in the dictionary. The fact is, like it or not and believe it or not, YOU ARE BROWN and your car tires are black. You can say black is a culture but when they deal with you, they deal with you based on it’s definition – dismal, gloomy, dark, diabolical, treacherous, devoid of light.
WAKE UP AFRICAN AMERICANS. We do not call the Asian yellow man because he would not stand for it. We do not call the Native American a red man because he would not stand for it. We do not call the Hispanic man a brown man because he would not stand for it. And many Africans, Haitians and Jamaicans do not accept being called a color they know they are NOT.
Ironically, African Americans are the only ethnic group/race on the planet which allows ourselves to be called a color we are not, allowing ourselves to be defined by color, by someone else and to allow ourselves to be attached to a color we are not – a color they filled with negative denotations. Then we fight to help keep the lie in place.
Is it any wonder that cops treat us as BLACK people by the definition of dismal, gloomy, treacherous, evil etc? We will never rise and overcome as a people if we allow other groups to define us, to define us with a lie and we are sadly willing to help them. AFRICAN AMERICAN LIVES MATTER PEOPLE. Black is the color of my car tires, not my skin. I am a family and relationship counselor who specializes in deprogramming African Americans from slavery mindsets.