The Community Development Advocates of Detroit is hosting a community conversation about the impact of payday loans on Detroit residents Tuesday night.
Ruth Johnson is the public policy director at Community Development Advocates of Detroit. She hopes the event will promote financial literacy among residents, and bring attention to a problem that she says has become a huge issue for Michigan.
“These loans have drained more than half a billion dollars over the last five years from our state. In 2016, these loans cost Michigan citizens more than ninety-four million dollars," she said. "And what’s really tragic is that payday lenders target the most vulnerable at a very desperate time. They keep cycling and cycling through renewing or getting new payday loans to pay off the previous loans.”
Sherry Gay-Dagnogo is a state representative from Detroit. She says payday loan companies target communities of color and communities living in poverty, citing a 2018 Center for Responsible Lending study.
“These payday loan institutions predominantly set up in communities of color and where there is a great need," she said. "Anywhere where you find poverty and folks who are just trying to make it paycheck to paycheck: they’re looking at these payday loans as a means to address some of the gaps in their finances.”
She says these loans have the opposite effect.
“The thing is though, is that it exacerbates these gaps and continues to place more burden on the consumers as they continue to work," she said. "Then the pay doesn’t add up to what they need it to be to address their finances. They’ll find that they still end up in this same cycle of poverty.”
Both Johnson and Gay-Dagnogo point to regulations as being a potential solution.
“We want people to know about House Bill 4251 that would put a 36 percent cap on interest rates,” Johnson says. “Sixteen other states and the District of Columbia have established this 36 percent cap. We want to join these states in making some reasonable restrictions to protect consumers.”
Gay-Dagnogo makes reference to the same bill, saying, “we need to look at legislation, like my colleague Representative [Bill] Sowerby has, that would cap these fees and reduce the ability for payday loans to continue siphoning money out of urban communities through these fees.”
The event is scheduled to take place tonight at the Central Detroit Christian Community Development Corporation at 1550 Taylor Street in Detroit. Doors open at 6 p.m.