Maybe it’s because of the Bible story from the book Matthew detailing Jesus driving the “buyers and sellers out of the temple” that money lenders are held in such high contempt. Fourteen states and the District of Columbia ban payday loans. Payday loans are a highly-controversial form of credit because as borrowers find fast relief, politicians have entered the fray to oppose these loans’ high-interest rates.
Payday lending’s proponents argue that it is a vital way to help underserved people solve temporary cash-flow problems; opponents claim that the practice preys on overburdened people.
Despite the distain of the intellectuals, payday lending has mushroomed into a $46 billion business. Governments are seeking to institute laws to cap payday operations, a move that could restrict credit and encourage more illegal lending.
Representative Alcee Hastings is becoming a champion to Americans that live paycheck to paycheck. The Democrat from Miami is a heretic among liberals and their efforts to regulate payday lenders. He raises concerns that strict regulations might cut off an essential source of short-term loans. Many Black Americans can’t get help from big banks when they are in a cash crunch between paychecks.
In a Washington Times editorial Hastings said: “It is difficult for many to imagine having to choose between paying the rent on time and purchasing your sick child’s prescription medicine. For these credit-constrained individuals, payday loans provide a financial solution when emergencies or other unforeseen events arise. I know how important these loans can be and have relied on a short-term loan that was the only avenue available to me.”
When a Member of Congress admits to using payday lenders and a high-interest loan to overcome a “bump in the road” it’s time to question paternalistic assumptions associated with payday lending. “We have the cash you need!” is an alluring offer millions of Americans buy into. Instead of assuming the “victim” position on this issue, more Blacks need to consider that payday-loan stores or cash-advance shops are among the financial sector’s fastest growing businesses. Check cashers first appeared in New York in the 1940s as soldiers returning from service encountered obstacles while trying to cash their government checks. Decades later, these businesses have evolved. Aside from their usual check cashing services, they’ve became convenience centers where customers also pay their public service and cell phone bills and buy lottery tickets and phone cards – all in one stop.
No question that check-cashing stores are often in the ire of local politicians but, the “cash in a flash” payday loan industry represents viable business opportunities for entrepreneurial Blacks. In fact, nearly one third of African Americans use financial services like check cashing places which should prompt enterprising Blacks to explore the “cash now” industry through payday loans, check cashing, factoring and/or invoice discounting.
More often than not, these business operations cater to lower income people. These businesses are booming and can be located everywhere these days, from the local strip mall to the Internet. Studies reveal that 5.5 percent of American adults – 12 million people – receive $7.4 billion annually from payday lenders. Twelve percent of Blacks have taken out payday loans, more than twice the number of whites (4 percent).
In the U.S., over 100,000 businesses operate as non-depository credit institutions. Often run by non-Blacks, these businesses employ over 500,000 people and provide gross annual payrolls in excess of $22 billion dollars. People participate in this industry as home-based businesses, or operate out of an office or small retail storefront. This type of business can be a great add-on to services such as travel agencies, tax preparation businesses and mortgage and real estate offices. These businesses also offer factoring, invoice discounting, check cashing, and business financing.
With all the commotion around check cashing services, it’s important to you determine where your head and heart are in the matter. Are you an entrepreneur or victim? Some Blacks will increase their incomes through learning more about America’s payday lending industry as they move past the hype that “check cashing stores exploit poor people,” to see how to serve them.
William Reed is publisher of “Who’s Who in Black Corporate America” and available for projects via Busxchng@his.com