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3. Friedline, Terri and Nancy Kepple. 2017. “Does Community Access to Alternative Financial Services Relate to Individuals’ Use of These Services? Beyond Individual Explanations.” Journal of Consumer Policy 40(1):51–79.
4. McGray, Douglas. 2008. “Check Cashers, Redeemed.” New York Times Magazine.
The Payday Loans indicator measures the number of payday loans per 1,000 residents within one mile of a neighborhood. Access to credit is imperative to financial health and stability. However, many low-income neighborhoods lack access to traditional banking institutions and other financial services that provide access to capital. In many disadvantaged neighborhoods, the payday lending market has grown rapidly to fill the void in access to capital. Payday lending institutions provide loans, for relatively small amounts, typically a few hundred to a few thousand dollars, at high interest rates. Studies show that higher access to payday loans contributes to economic hardship, as borrowers face difficulty in paying important bills such as their mortgage/rent and utility bills. Furthermore, even modest to high-income households, who live in neighborhoods with a high density of payday lenders- are more likely to utilize payday loans. However, those same neighborhood characteristics are associated with chronic utilization among low-income individuals. Payday loan services are essentially a response to low-income residents and other high-risk borrowers who are locked out of the traditional credit market, and while these alternative financial services provide a need, savvy state and municipal polices are pertinent to alleviate the burden of financial distress that often is amplified under the context of exorbitant interest rates and fees. Data for the Payday Loans indicator is available from InfoGroup, Inc.