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Race Matters: The Concentration of Payday Lenders in African-American Neighborhoods in North Carolina

DURHAM, NC -- Payday lenders who trap people in triple digit-interest loans locate their stores in African-American neighborhoods in higher concentrations, according to a report by the Center for Responsible Lending (CRL).

African-American neighborhoods in North Carolina have three times as many payday lenders per capita as white neighborhoods, even after controlling for variables associated with the industry's purported customer base such as income and homeownership.

"This study shows in the starkest terms that African-American neighborhoods bear the brunt of predatory payday loans -- loans that are not even legal in North Carolina," said Mark Pearce, CRL president. "This confirms that the abusive loans made by payday lenders are not just an issue of fair and responsible lending, but are a civil rights issue as well."

Payday lending is illegal in North Carolina, but large national chains such as Advance America, Check 'n Go and Check Into Cash continue to operate openly by affiliating with out-of-state banks which contend they are exempt from state law. Nearly 400 stores operate in North Carolina, even though state law hasn't permitted them since 2001. Currently, the North Carolina Commissioner of Banks and Attorney General are investigating payday lending activity.

Because CRL looked at stores owned by the national chains, the CRL report has implications far beyond North Carolina's borders. Twelve states, in addition to North Carolina, are subject to rent-a-bank arrangements because payday lending is not authorized by their state legislatures (Michigan, Georgia, Pennsylvania, Maine, Arkansas, Massachusetts, West Virginia, New York, New Jersey, Connecticut, Vermont, and Maryland). In fact, over 3,000 payday loans stores in the country are operating outside of the laws of their state.

At a typical payday shop, a person short on money before payday borrows, $255 by writing a postdated check for $300. After two weeks the borrower often can't repay the principal and writes yet another postdated check. Ninety-nine percent of payday loans are made to repeat borrowers, despite industry claims that the loans are for one-time, emergency use only. Advance America has reported that their average number of loans per borrower was 9 per year in 2003.

CRL has previously estimated that predatory payday lending costs American families $3.4 billion annually, a cost that is increasing rapidly as the size of the market explodes.

The CRL report, "Race Matters: The Concentration of Payday Lenders in African-American Neighborhoods in North Carolina," along with charts and maps of all metropolitan statistical areas -- illustrating the clustering pattern in African-American neighborhoods -- is available from CRL at

Contact: Sharon Reuss at 919-313-8527 or