While the payday lending industry frequently describes its typical customer in detail, discussion of race is noticeably absent. This report corrects that omission. Our analysis of North Carolina neighborhoods reveals a powerful relationship between the proportion of African-Americans in a neighborhood and the prevalence of payday lending stores.

African-American neighborhoods have historically been disadvantaged by unfair lending practices. This study shows a continuing problem. Predatory lending in protected communities may constitute discrimination -- not because it excludes minorities, but because it targets and exploits them by offering loans with abusive terms and conditions.

Key Findings

  1. African-American neighborhoods have three times as many payday lending stores per capita as white neighborhoods. When we sort all NC census tracts by proportion of African-American residents, there are three times as many payday stores per capita in the top half as in the bottom half. This disparity increases as the proportion of African-Americans in a neighborhood increases.
  2. This three-fold disparity remains unchanged even when we control for other neighborhood effects. Our findings show that race matters, even when we control for other factors. Variables that the payday industry claims are key demographics of its customer base -- income, homeownership, poverty, unemployment rate, urban location, age, education, share of households with children, and gender -- do not account for the disparity.

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