The Gender Divide in Payday Lending

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.