Posted August 17, 2005 to Consumer Ed | Section Home | Print

NAACP Vows to End Payday Lending in N.C.

By Carolyn Coleman, Board Member of the National NAACP

As a Board Member of the national NAACP, I made a commitment to the African American community to uphold our values and to work towards accomplishing our goals, one being ensuring economic equality among all citizens. For almost a century our organization has taken steps to empower our communities financially, only to have our efforts derailed by payday lenders who strip earnings from hardworking families. At our recent convention in Milwaukee, delegates voted to oppose predatory lending in all its forms. This quickened my resolve to end the practice of payday lending in North Carolina.
Economic empowerment of our community has long been one of several strategic initiatives of the NAACP. In our Strategic Plan, we seek to advocate for increased access to credit, capital, and other financial services for African-Americans and other people of color.

In keeping with the national NAACP’s position, I am opposed to bills like NC Senate Bill 947, which authorizes payday lending. Julian Bond, our chairman and a staunch advocate against predatory payday lending has stated, “The NAACP is dedicated to eliminating payday lending, because wealth building and saving for the future are vital to the economic success of communities of color.” We are committed to ensuring the economic equality of our community, and putting an end to any financial products that are destructive and detrimental to the growth of our community wealth.

Imagine taking out a $325 loan – what you might consider an emergency—to buy groceries for your family until your next payday, only to be blindsided by $800 in fees from the lender. No, it’s not loan sharking, it’s predatory payday lending, and while it is illegal in North Carolina, lenders are bending the rules in order to trap more and more borrowers in a vicious cycle of debt.

Payday lending was banned in North Carolina in 2001, after a provision authorizing payday lending for four years expired. However, payday lenders in NC have since teamed up with out-of-state banks, and argue that they can import higher interest rates under laws (or the lack thereof) governing interest rates in other states.

The Center for Responsible Lending in Durham recently published a report entitled, “Race Matters” which finds that payday lenders have three times as many stores in African-American neighborhoods per capita as in predominantly white neighborhoods. This is problematic because African-American neighborhoods have historically been disadvantaged by unfair lending practices, and predatory lenders are taking advantage of the economic woes of African-Americans by targeting and exploiting them by offering loans with abusive terms and conditions.

Payday loans only require borrowers to have a bank account and a steady income. The borrower writes a post-dated check and the lender gives them the cash minus fees. Lenders usually allow only two weeks for the borrowers to repay the loan in full. They are often forced to renew the loan (also called “flipping”) and pay the fees. The typical borrower is flipped 8 times, paying 400% APR. On a loan of $325, this equates to $52 every two weeks, or $104 every month.

Advocates for payday loans argue that most consumers who find themselves strapped for cash have no other choice than to take out a payday loan, while the truth is that there are other options available. Consumers with debt problems have several alternatives, including but not limited to: working out a payment plan with creditors, a cash advance from their employer, emergency assistance programs, credit union loans and traditional overdraft protection.

Whether it means asking for a loan from a family member or paying the late charges assessed from a missed car or utility payment, it is imperative that consumers understand that payday loans are designed to fail and they should avoid them at all costs. More information on the dangers of predatory payday loans can be found at the Center for Responsible Lending website: www.responsiblelending.org.

The NAACP has vowed to take an active stance in the fight against predatory payday lending. We will not allow lenders to prey on our neighborhoods and our citizens in order to strip the wealth we as a community have worked so hard to accumulate and maintain. Information regarding the NAACP’s commitment to economic empowerment can be found on the national website: www.naacp.org. •