High Interest Loans Particularly Focused on Chicago’s Black Neighborhoods
A myriad of high-interest loans targeted Chicago’s black neighborhoods, an analysis of 2019 borrower data finds.
Based on information gathered from state regulators, the non-profit organization Woodstock Institute discovered that the major zip codes for payday loans, excluding the loop, were mostly, Black, The Chicago Sun-Times reported. A breakdown of these zips showed:
- 60619 and 60620 on the south side, including parts of Chatham, Burnside, Avalon Park, Greater Grand Crossing, Auburn Gresham, and Washington Heights. These zip codes had over 16 payday loans per 100 people and are both 95.7% black.
- 60624 on the West Side, which includes parts of West Garfield Park, East Garfield Park and Humboldt Park, had 15.8 payday loans per 100 people. This postal code covers an area 90.7% black.
On the contrary, the zip codes with the lowest occurrence of payday borrowers were predominantly white. Take the 60614 into the Lincoln Park neighborhood. He had 1.1 payday loans per 100 people in an 84% white zip code.
The review included postcode data for borrowers with payday loans and installment loans, most of which ended on March 23, when a new interest rate cap was imposed in the ‘Illinois. The data was obtained through an application for registration with the Illinois Department of Financial and Professional Regulation.
The information for 2020, although an odd year for loans due to COVID-19, was similar. It showed the two main postal codes, 60619 and 60620, followed by 60628. These postal codes cover parts of Roseland, Pullman, West Pullman and Riverdale which are 93.1% black.
Brent Adams, senior vice president of the Woodstock Institute and director of the IDFPR under former Governor Pat Quinn, described it as “of statistical significance on steroids.”
“These loans very specifically target black communities,” says Adams. He further said high interest loans perpetuate a status quo “which is riddled with racial and economic inequities.”
The Woodstock Institute’s analysis is worrisome because studies have found that black Americans have an average net worth about a tenth that of white Americans. And this is mainly due to the discriminatory practices of the past that have hampered the accumulation of family wealth, including the denial of mortgages.
For their part, industrial groups say they lend money to people who do not qualify for traditional bank loans, Chicago Sun-Times reported.
Tiffany Moore of Forest Park first used an installment lender when COVID hit and a tenant in her investment property couldn’t pay rent. His loan, for $ 9,500, had a term of five years and an interest rate of 35.989%.
Even with a rate below 36%, she found that she would repay more than double what she had borrowed. So Moore paid him off earlier. “I was like, I have to get rid of this,” she said. “How can you move forward if they charge all this interest?” “