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The Gender Divide in Payday Lending

posted by Amy Schmitz

Nathalie Martin has done great work and has posted comments on Creditslips.org regarding payday lending. I also have been interested in how these payday loans prey on consumers with the least resources and power, and have helped consumers with related issues through my outreach work. At the same time, I have had the privilege to have students like Adria Robinson, who take great interest in these consumer issues. Adria Robinson is so passionate about consumer issues that she volunteered to work with me in gathering the latest data on Colorado's payday lending post-passage of its new payday regulations in August of 2010. Thanks to Adria for her help with this post!

The regulations have various complexities and oddities due to the political battles that muddied the legislative process, but in a nutshell, they curb allowable fees to include an origination fee, 45% interest and monthly maintainance fees, and require a minimum loan term of six months.  

The latest report on Colorado payday lending indicates that the dollar amount of payday loans in Colorado fell by almost 60% in 2011 after enactment of these new regulations, while the number of other small loans increased. The data also indicates that the enactment may have contributed to the drop in the average contracted APR for payday loans from 338.90% to 191.54% (although it should be noted that the average APR has been on the decline since 2002).  However, the average amount financed went up in 2011 to $373, which is higher than it had been in the previous ten years. There also has been an increase in "same-day-as-payoff" transactions.

Moreover, the demographics of payday loan borrowers has remained constant desite the change in the law.  A prime target of these loans remains predominantly single women. This all seems to tie in with income, and the fact that women tend to earn less than men and many payday loan borrowers are single moms who are struggling to care for their children.  

Indeed, since 2001, women have outnumbered men as payday loan consumers. The breakdown by gender is as follows:

            Male         Female
2001 46.41%         53.59%
2002 44.80%         55.20%
2003 44.05%         55.95%
2004 45.46%         54.54%
2005 46.37%         53.63%
2006 46.85%         53.15%
2007 46.02%         53.98%
2008 44.60%         55.40%
2009 44.53%         55.47%
2010 46.58%         53.42%
2010 45.82%          54.18%
2011  47.56%         52.44%

As Adria put it after looking into the Colorado reports, "I think it is significant that payday loan companies advertise to and otherwise target women to borrow but I think the reason why women borrow much more than men is because they have more expenses or less resources than men." It is hard to deny the gender debt divide after doing the research.


Based on these numbers, I can't infer targeting to women. Lower-income men die and are incarcerated more frequently than women. Their unemployment rate is higher, and IIRC, payday loan companies require employment. Military service might also be an element.
I wouldn't rule out targeting to women, because there are some confounding factors, such as men's higher propensity to discount time (econobabble for "irresponsibility.") But I can't infer it from the raw numbers.

You guys really need to do a difference in difference with this data to see how the policy changed things. Do you have data for any of the neighboring states?

Not surprised, ladies need more and most of the time the money borrowed is to use on the kids (food, diapers, etc) and other household necessities. Low paying jobs with a long 2 week paycheck intervals, the money don't last...

First let me say that I am no fan of the current structural deficiencies associated with the repayment terms of payday loans due to the mismatch of borrowing need and an adequate payback period that exists in some circumstances. That is where many of the problems lie with the so called “debt trap” scenario.

Instead of seeking a refinement of this product that would allow a process to extend beyond the initial contract period (two weeks) under a reasonable profit margin for the lender (private enterprises, not tax-payer subsidized non-profits), advocates seek to slander the product in its entirety. This ultimately harms the very people they seek to protect as they eliminate a viable, cost effective option to consumers.

As a consumer lender (traditional installment loans) with practical, real life experience in interacting with consumers where small dollar lending is concerned, I see material misinterpretations made concerning both the circumstances that create the need for this product and the fundamental thought process of the end user.

Too often the assumption is that consumers are forced into a payday product because they do not make sufficient money to cover basic living expenses. You will hear that the consumer’s need for the loan was to pay a light bill, or rent, or food, implying that they are borrowing just to live on. That is a false narrative.

In fact, what created the need in almost all the demand is an earlier unplanned event which disrupted the monthly household budget allocation such as a car repair or other expenditure that is not part of the routine month to month expense. Unfortunately, there are few responsible loan options that would assist in smoothing out that disruption because of an unrealistic approach to APR limitations on small dollar credits in many states. The inability to discuss a small dollar loan product in terms of dollars versus an APR is what led to the proliferation of the payday product in the first place.

I do want to challenge the statement made in this posting that payday lenders are specifically targeting woman because of these use rates. I would argue that this narrative is too narrow and misses the fact that in lower income households, women are generally the responsible party for both managing household finances and income regardless of their relationship status and therefore would be more inclined to initiate a transactions versus being lured into it due to some marketing strategy.

very informative post and comments on this topic. Causation asside, women use these loans more than men. As to the neighboring states, at least anecdotally, we have seen an uptick in loan amounts down here in New Mexico too, with no real change in the law.

It’s hard to say who tend to borrow more – men or women. Being a single mom is really hard especially when you have no support from relatives, so it’s clear that these women should borrow money to stay afloat and provide themselves and children. But also I think that everything depends on a person – there are people who are afraid of debts and those for whom taking out a loan is absolutely normal. Probably women have more expenses then men do, that’s why they use different lending services, it’s not that easy to buy everything you need when you have a limited budget.
Lily from http://paydayloansat.com/

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