Payday lending might be back in NC

February 21, 2013 at 11:05 am 1 comment

Payday lenders have been illegal in North Carolina since 2001, but recently there has been a proposed bill to reverse this and make it legal for payday lenders to operate in our state again.  As Progressive Pulse describes it, payday lending

… is the pernicious practice of making short-term loans (typically of a week or two in length) to desperate people at effective annual interest rates of several hundred percent.

This is a very dangerous possibility for North Carolina. Payday lending is marketed to people who are looking for a quick fix for an immediate financial problem, but what actually happens is that people end up in a cycle of loans that they are ultimately unable to pay. The Center for Responsible Lending explains that these lenders are specifically located in low-income neighborhoods, targeting those who are most vulnerable and least able to climb out of these predatory cycles. The graphic below clearly articulates the cycle and problems with payday lending.

Re-introducing payday lending would not help individuals and communities who are already struggling financially. In fact, it could make the economic outlook for many people worse. We reported yesterday about the wealth gap  between whites and minorities, and the link between unemployment and the ability to create generational wealth. And we have blogged about the uneven economic recovery, in which some communities have lagged far behind others and in which income inequality has continue to grow. Payday  lending would only exacerbate these trends, by opening up the door for desperate people to dig themselves further into a financial hole. Rather than taking us backward, our state’s decision makers should be focusing on policies that help to strengthen– not deplete– communities’ resources, wealth, and health.

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Entry filed under: Economic Development, Economy, Jobs & Employment. Tags: , , , , , , , .

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