I’m going to get on my soapbox for a minute. This will be a worthwhile read, so stay with me.
I’ve talked about how I’m working as a consultant to United Way of Greater Los Angeles, a fabulous organization committed to creating pathways out of poverty in Los Angeles County. Part of the reason that I love working with this organization (amongst many reasons) is that I feel that the project I’m assisting with will both directly and indirectly affect the organization’s fight to end poverty.
Last Friday, I was on my way to the office and took a different route. I went through several neighborhoods, down Vermont Avenue and Pico Boulevard, heading to downtown. I saw lots of people out and about, at the bright and early hour of 7:00 am. There were people walking, waiting at bus stops, painting the sides of buildings. The street was bustling with activity, with lots of different kinds of people getting a start to their day. One of the things that I love most about cities is the constant stream of activity that makes you feel so alive, so connected to others. LA has its own vibrance. Amidst all the hustle and bustle, it is a colorful city in a beautiful setting.
Something struck me as I drove through this area last week. I saw 1,2, 3, 4, 5 – five – payday lenders. Five. Maybe you are unaware of the epidemic of payday lending across the United States.
Before I get in to my diatribe, let me give you some facts about LA County in case you are unfamiliar. LA County has a population of 9,889,056 (which spans over 80 different cities including: Malibu, Hollywood, Beverly Hills, LA, Pasadena, Burbank, the list goes on…). LA County is geographically huge, spanning 4,057 square miles. In 2006-2010, there were an estimated 15.7% of people living below the poverty level. (All of these stats are courtesy of the US Census.) In case you are unaware of the poverty level, it is set as $19,090 for a family of three in the contiguous United States, and is adjusted based on the number of people living in a household. (Stats courtesy of the US Department of Health and Human Services.)
I’m a wife and a mom of a 10-month old daughter. My husband and I both work very hard. We live a very healthy, responsible lifestyle. We are not lavish. We are not indulgent. Heck, we don’t even have satellite or cable television. And I cannot imagine what it would be like to live off of $19,090 per year. But, lots of people do it. Approximately 1,552,581 people in LA County live below the poverty level, according to the US Census data I outlined above. Living off of less than $20,000 a year, it is easy to see how families can be down to their last dollar very quickly.
Ok, now back to my point – I passed 5 payday lenders over a 3 mile span between Highway 101 and downtown LA. Payday loans are crucial to many, many, many people. This is not just a problem in Los Angeles, but I’m using my observation of this area to show you a subset of people in the U.S. who are affected by this issue. Let me unpack this a little bit for you so that you can see how grave this problem really is.
As stated in this research report from The PEW Charitable Trusts, “Twelve million American adults use payday loans annually. On average, a borrower takes out eight loans of $375 each per year and spends $520 on interest. Most borrowers use payday loans to cover ordinary living expenses over the course of months, not unexpected emergencies over the course of weeks. The average borrower is indebted about five months of the year.”
The Huffington Post published an article in July stating that “twenty years ago, storefront lenders were few and far between. By 2003, there were about 3,000 storefront lenders, according to one report. Pew reports that today more than 20,000 storefront lenders — along with hundreds of online outfits and increasingly banks and credit unions — offer these types of high-interest loans.” An NPR article describes payday lending as a $33 billion dollar a year poverty industry. If that doesn’t get your attention, nothing will.
As I was researching payday lending (also called predatory lending, sometimes) these facts disturbed me most:
- Forty-four percent of borrowers ultimately default, even after paying back their loans several times over, and thus are pushed ever closer to poverty.
- While payday lenders prey on the most vulnerable and drive the poor into never ending cycles of indebtedness, the lending institutions reap huge profits by borrowing from big banks like Wells Fargo, JPMorgan Chase, US Bank and Bank of America at extremely low interest rates, which they in turn lend out as payday loans charging between 260% and 570% APR.
- Companies continue to make record-breaking profits by setting up in neighborhoods isolated from traditional banking options. With more payday lending locations than McDonald’s restaurants in the U.S., these companies gladly admit that they are often the only available line of credit for people in poverty.
- Major banks like Bank of America, JPMorgan Chase, and Wells Fargo finance about 42 percent of the entire payday loan industry in the U.S. Those loans strip $3.1 billion in wealth from low-income, working poor who are literally trying to pay bills from paycheck to paycheck.
The point is this: if you are living in poverty, you often don’t have enough to make ends meet. With bad credit or no credit, you are left with few options if you are tight on money to cover your monthly expenses. Payday lenders are an easy answer to putting food on the table for many, many people. To a person in a desperate situation, a payday lender may seem like a harmless helping hand. But we can fight this — and we can fight poverty.
No one wants to live in poverty. Now ask yourself – what are YOU doing to help make a difference? Poverty is not something specific to LA, obviously. It is a widespread issue affecting many, many people across the US and around the world. Can you volunteer a few more hours? Can you donate a little bit more money? Can you advocate for ending poverty and all of the issues that surround it, including payday lenders? Imagine how helping someone would make you feel, knowing that YOU made a difference in their life. And maybe, just maybe, because of your help you’ll enable one less person to rely on a predatory lender.
Here are a few ideas to help you get started making a difference toward poverty, in case you need a jump start, no matter where you live:
- Support the Center for Responsible Lending, a nonprofit, non-partisan organization that works to protect homeownership and family wealth by fighting predatory lending practices. They have lots of options for support on their home page, including donating and advocating. I signed their payday loan pledge. And I connected with them on Twitter.
- Help spread the word about BankOn initiatives across the US. The BankOn website shares a list of reasons why bank accounts are so important, so if nothing else, educate yourself on this. Having this knowledge may help you to help someone else.
- Monetary issues are just one of the many problems that those in poverty might be facing. Food insecurity is another issue. Feeding America is the nation’s leading domestic hunger-relief charity. Their mission is to feed America’s hungry through a nationwide network of member food banks and engage our country in the fight to end hunger. Feeding America’s website has a wide variety of options to get involved. You could use the food bank locator to find somewhere to volunteer. I signed the pledge to urge Congress to protect anti-hunger programs.
- Connect with Points of Light, Hands On Network and generationON. These organizations are on the cutting edge of volunteerism and engagement. I’m certain that you can find a way to connect with them that works for you, and will be some way beneficial to the fight against poverty.
- Educate yourself on payday loans. The PEW Charitable Trusts offers great resources. You never know when this information might be useful to share with others.
- If you live in LA or the surrounding areas, I encourage you to engage with United Way of Greater Los Angeles. They are doing inspiring things to create pathways out of poverty.
- Share my post with others. Let’s harness each other’s strengths, along with the power of social media, to help those in need.
I know that we can fight poverty together. You have to believe! Who’s with me?