“Payday Loan Place Window Graphics,” Taber Andrew Bain

February 15, 2018; Next City

In Louisiana, there are over 1,000 payday lenders’ storefronts, which is more than three times greater than the number of McDonald’s storefronts, wrote columnist Robert Mann in the New Orleans Times-Picayune in 2015. A typical payday loan, Mann points out, charges the customer $115 for a $100 payday check. Payment of the $15 interest is due within two weeks; if the customer cannot make the payment, another $15 is added in interest. The result: annual interest rates approaching 400 percent per year. And for the state, the costs are estimated to total more than $241 million.

Steven Jackson, who is the current president of the Caddo Parish Commission, has led efforts to remedy this situation in the parish (county), which is centered on the city of Shreveport. Recently, reports Oscar Perry Abello in Next City, Jackson “won unanimous approval from the parish commission to form a task force to address the issue of banking deserts in and around Shreveport. The top priority for the task force: finding a willing partner, either a bank or credit union, who could take some of Caddo Parish’s deposits and open branches inside banking deserts.”

Nationally, payday lending is estimated to be a $38.5 billion market. Economists at the Federal Reserve note that, “The closing of thousands of bank branches in the aftermath of the 2007–09 recession has served to intensify societal concerns about access to financial services,” especially for low-income people and people of color.

The lack of banking services is particularly acute in Caddo Parish, which, Abello notes, “is around 49 percent black.” Abello adds that “an estimated 22.4 percent of households live below the poverty line, and the median household income is around $40,000.” By contrast, the US median income is much higher; a recent estimate placed that number at over $59,000.

Abello adds that there is a strong correlation between factors such as income and race and bank branch proximity. The parish, Abello adds, “hopes to use the state’s banking development districts program, which allows local governments to incentivize financial institutions to serve banking deserts by putting municipal deposits into new branches located in those areas. Banking development districts must be identified by the local government and approved by the state.”

Finding a bank or credit union though can be made easier by leveraging the parish’s assets. The strategy that Jackson has advocated involves tapping into the parish’s $144 million in cash and investments. “This provides the parish with an ability to deposit its funds to support those institutions participating in the anti-predatory lending effort,” Abello writes.

Abello adds that Jackson wants the task force to identify neighborhoods where there may be a bank branch relatively nearby, but also a large contingent of senior citizens or other households who do not have access to transportation and therefore cannot use the branch. “It creates a barrier for folks,” Jackson says. “If a person in the [predominantly Black] MLK neighborhood had a new year’s resolution to open a savings account, they’d have to drive ten minutes to [a bank] branch, but you can easily find a payday lending place over there.”

Jackson notes that the parish government also wants “to look at how banking has changed, maybe look at a mobile banking branch.” The idea, Jackson explains, is to better provide or create access to assist residents be able to take advantage of traditional financing and banking, thereby avoiding the high fees of check cashing and related services. “And there’s always an opportunity to rein in some of the payday lending through policies,” Jackson adds.—Steve Dubb