By Tanya Somanader~
As a growing number of Americans slip out of the middle-class into economic insecurity, they are increasingly vulnerable to predatory lending schemes like the payday loan. Each year, about 12 million Americans incur long-term debt by taking out a short-term loan that’s intended to cover a borrowers’ expenses until they receive their next paycheck. Payday lending takes “unfair advantage of lower-income borrowers,” with most taking out nine repeat loans per year with an interest rate as high as 400 percent. Forty-four percent of borrowers ultimately default, even after paying back their loans several times over, and thus are pushed ever closer to poverty.
But, as a new National People’s Action report shows, one borrower’s poverty is a payday lender’s profit. The report finds that lenders “take at the very least $3.4 billion” from low-income communities every year in fees alone. Titled “Profiting Off Poverty,” the report describes how payday lending companies open in areas isolated from traditional banking options to ensure they are the only available line of credit. Faith and Public Life reports: