Payday Loans Lead to Financial Instability Zones

Payday Loans Lead to Financial Instability Zones
Profiteers seizing on the stuggles of Chicago's working families

Increasing enforcement capabilities through the Department of Business Affairs & Consumer Protection is part of the new reforms Mayor Rahm Emanuel hopes will provide a measure of protection from predatory financial services that have continued to proliferate within the city.

Chicago’s most vulnerable families are the focus of the Mayor’s recently announced crackdown on bad business practices.  The concentration of predatory financial service storefronts have proven to lead to higher bankruptcy rates, higher crime rates, lower credit scores, and overall financial instability according to a December 5,2012 press release issued by the Office of the Mayor.

Specifically, the Mayor is implementing a new zoning ordinance to reduce the clusters of an already large number of payday lenders, auto-title loan stores and other predatory financial services in Chicago.

Poverty Profiteer Zones

Profiteers seizing on the struggles of Chicago’s working families and attempting to capitalize on competitor's advertizing, have created clusters of poverty predators.  Typically, these clusters include predatory tax preparers, pawn stores, auto title lenders, check cashers, cash for gold stores, rent to own stores and of course, payday lenders.

There‘s little doubt about the profitability of these predatory storefronts.  Alone,  the number of storefronts like Payday Advance, PLS Check Cashers, Check ‘n’ Go, Cash America Pawn, Illinois Title Loans, Inc., Advance America, Check Into Cash, Cash America Jewelry & Loan, First Cash Advance, Sun Cash and USA Payday Loans stores all located on North Avenue are indication enough.

Clustered Poverty Profiteers

Clustered Poverty Profiteers

Driving through the 60639 and 60651 ZIP codes which border opposite sides of North Avenue between Cicero and Harlem Avenues, you’ll see no less than 20 poverty storefront lenders.

PLS Check Cashers occupies a well lighted—“Open 24 Hour, We Never Close”—storefront on the northwest corner of Laramie and North Avenue.  You’ll find JTS Just Tax Service 30 yards further west and The Tax Helper another couple doors down, whose addresses are all in the 60639 ZIP code.

Standing on the meridian between four lanes of continuous traffic, is a man shivering in the frigid Chicago cold flashing a large brightly colored "Cash 4 Gold" sign with a red arrow pointing drivers to another storefront.

Occupying the southwest corner, directly across the street in the 60651 ZIP code, is Illinois Title Loans where signs read, “Cash Loans On Car Titles.”  Overlooking the Illinois Title Loans building from the west, is a PLS Loan Store advertisement measuring the entire east facing upper half of the adjacent three-story building.  No more than 20 steps further    west, you’ll find a Cash for Gold store and as you continue block after block, North Avenue is lined with similar business clusters specializing in poverty financial services.

 

Targeting Single Parents, Non-English Speaking, Renters

According to socio-economic information extracted from 2010 Census data by Chicago Public Schools, these poverty lender storefronts appear to be focusing their business model on families with a median income of $37, 201.00, where 63 percent are single parent families.  On the north side of North Avenue, 26 percent do not have a high school degree and 55 percent of these families are renting--a key demographic according to a new Pew Trust Foundation report titled, Payday Lending in America.

On the south side of North Avenue—directly across the street—family income drops to $34,519.00 while 40 percent of the households are single parent families.  Adults without a high school degree in this area jumps to 45 percent and 84 percent of these families speak a language other than English.

The Zoning Ordinance Is A Continuing Reform

Co-Director Lynda DeLaforgne of Citizens Action Illinois--the State’s largest public interest organization--believes that “any zoning ordinance that limits the amount of payday loan vender licenses and that keeps them geographically spread apart is certainly, from my perspective, going to help the consumer stay out of some of the traps of payday lending—because it’s too easy.”

She went on to explain, that when Monsignor John Egan—who was from DePaul— first started the payday loan reform campaign in 1999, he did so because one of his parishioners had come in and she had two loans out at the same time.  “She got one from one place and two blocks away she got another one and was using Peter to pay Paul and she never got out of the cycle of debt” said Ms. DeLaforgne.  “She was just caught in this churn of debt.”

DeLaforgne was clear, “anything that limits it from a zone perspective is always, I think, going to be beneficial to the consumers.”

Low Wage Worker Target

Katie Buitrago, a Senior Policy and Communications Associate at the Woodstock Institute, a Chicago-based policy and advocacy non-profit, did some of the research in support of the Mayor’s Office on the ordinance recently passed limiting the concentration of payday lenders, pawn shops and other alternative financial providers.  An important goal of the Woodstock Institute is access to fairly priced and appropriate financial services.

“We looked at where Payday loan stores are concentrated and it wasn’t necessarily located in the low income communities, they were definitely there, but the biggest concentration in the city were in the loop, " said Ms. Buitrago.  "That is also where the biggest concentration of low wage jobs are," she explained.

“They tend to cluster around where low wage jobs center,"  Buitrago said.    “Honestly, there is a limited amount that the City has jurisdiction to do to limit payday lending and zoning ordinances are supposed to be sort of neutral actors.  They’re not supposed to say, we don’t like this kind of business,” said  Buitrago.

“When you look at the proliferation and concentration of payday lending, you can argue that we just don’t want a saturation of this kind of business in any community” emphasized Buitrago.

Importantly, more than 50 percent of both the 60651 and 60639 ZIP codes were determined to be mixed minority households and considered low wealth tax filers according to 2010 Woodstock Institute data which was initially collected to analyze how Refund Anticipation Loans—another predatory financial product—had weakened the City’s anti-poverty programs.

Comments

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  • I think Bob Marley said it best: " The Babylon system is the vampire. Sucking the blood of the sufferer"
    That line is from the song Babylon System.

  • fb_avatar

    Will the mayor add Jesse Jackson, Al sharpton, Liquor stores, store front churches and many Democrats to the list of people who congregate and entice the poor? Or are poverty pimps excluded?

    Once the Mayor and those who claim to know what's best for "free" adult men and women eradicated the pay-day loans businesses, will they step up and provide bridge loans to the poor and low credit people who cannot get a bank loan?

    I think we all know the answer to these questions.
    P.S. Predators seek out their prey. Free adults seek out pay-day loans and willing sign on the dotted line, with full knowledge of what is on the contract. Part of being a responsible adult is the ability to take the credit for the good decisions we and take the blame for the bad choices we make. You can take one away from people without also removing the other. If you do, then in end all you have is a city of dependent children. Is this what we want? Hmmm Maybe...

  • In reply to jay1000:

    I can never understand why people feel the need to inject their political views into every story.

    Yes, I'm sure democrats are evil poverty pimps and republicans are all patriots who fight to ensure our freedom. Got it!

  • This is one piece in a series of articles I'm writing on this subject. I will publish the next piece on Sunday.

  • there are reasons instability which are higher bankruptcy rates, higher crime rates, lower credit scores, and overall financial instability..

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    Zonning loans might be a good rule for people who have no self control when it comes to their personal finances. But do not forget that those people can easily find a location which has WI-FI and apply for loans simply because require cash instantly, what is solution for them? Restricting tattoo salons is a good solution for those who get drunk and mark their bodies irresponsibly! Let's better concentrate on that one!

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