OKPOLICY.ORG
By Brianna Bailey
A new study on payday lending in Oklahoma has uncovered evidence that high-interest lenders target economically distressed communities by opening storefronts in poorer areas and near military installations.
The study, from the “Demographics on Payday Lending in Oklahoma” from Howard University’s Center on Race and Wealth, sought to identify the demographics and economic characteristics that attract payday lenders.
The study’s main author, Howard University economics professor Haydar Kurban, used geographic information system software — or GIS — to correlate the the addresses of payday lenders with census data on income and other factors, as well as payday lender’s proximity to military bases.
The study found that most payday lenders in Oklahoma — 199 out of 324 in the state — are located within a 10-mile radius of military installations and bases.
Although a federal law called the Military Lending Act bans making loans to U.S. military members with annual interest rates above 36 percent, the lenders could still be making loans to civilians who work on the military bases.
“There’s no good way to tell if the people they are lending to are military or not,” Kurban said.
The Oklahoma Department of Consumer Credit, which regulates payday lenders in the state, examines payday loan transactions for compliance with federal laws against high-interest loans to military members and reports any non-compliance to the U.S. Defense Department, said Roy John Martin, general counsel for the agency.
Payday lenders also typically locate their storefronts in poorer neighborhoods with high concentrations of elderly, as well as younger people, and immigrants, Kurban said.
“The industry goes wherever the customers are, and these are the lower-income households that are have female heads of household, are younger and the neighborhoods have a high share of immigrants,” Kurban said. “This is a vulnerable population that cannot get loans through regular channels so they go to places that charge huge interest rates.”
Stuck in a trap
The high interest rate loans trap the borrowers in a cycle of debt, where they pay exorbitant interest rates for borrowing a few hundred dollars to survive between paychecks, Kurban said.
According to a recent study by the the personal finance website Nerd Wallet, Oklahoma payday loan users borrow an average $450, paying an average 391 percent annual interest rate.
Payday lender prey on the working poor who don’t otherwise have access to credit, said Kate Richey, project coordinator for the Oklahoma Assets Network at the Oklahoma Policy Institute.
“It’s part of their business model and not something they have been particular secretive about,” Richey said. “They don’t want the poorest people — they are going after the working poor that have a consistent paycheck and they have enough income that they can get them trapped in a cycle of borrowing.”
