Ethnic background has no part in a money advance personal loan

You will find lots of states made about the money advance industry. One of them is that loan providers exploit customers along racial lines. The premise is simple enough. Short term personal loan loan companies move to an area populated by poor people of color to get them hooked on bad loans. The truth is not that simple. A payday advance store, just like a BMW dealership, goes exactly where demand is highest. A business which doesn’t follow simple desire is a hard one to discover.

Where money advance shops cluster

One allegation made towards payday lending is that payday loan providers focus on certain races. They move to areas where that ethnic background is targeted. Payday loan companies were proven to be in areas that were mostly African American and Latino in California in a record released by the Center for Responsible Lending. These areas actually had a lot of financial services available in them like check cashing. Payday loan companies actually focus on areas that are urban or rural, have a population younger than 40 mostly and live at the poverty line. This had been shown in a study in 2009 done by Robin Prager. Lending to those who can’t afford to pay back the loan is a bad business strategy. That’s why payday lenders do not do that.

A specific demand leads to a specific area of supply

It is not really sound to argue that the demographics of the area make the service predatory because the business goes where there’s a demand. Marketing to a specific group rather than everyone would always be considered predatory is that is the definition. This has shown that targeting a minority is considered predatory because you are giving them what they desperately need. That means the clothing company that offers heavy coats that can withstand temperatures as low as negative 80 degrees is being predatory in Alaska because it is not also offered to those in Arizona.

Economics establishes anything

Cause and effect relationships don’t come from simple correlations. Payday lending, as a business, also does not yield enough high enough profits to lend to people who can’t pay the loan lender back. The businesses would all die off fast if this were the case. You can read more in the payday lending facts and statistics report on Personal Money Store.