For local communities to fully reclaim finance as a tool for generating prosperity, we must remove the obstacle of payday lending. Disproportionately concentrated in majority Black communities, payday lenders like to claim they are providing much-needed funds to people who have no other recourse. This claim is wrong on two counts. First, payday lenders are not offering genuine assistance, but rather setting a debt trap with interest rates above 200 percent, luring people into a cycle of debt that can last years and ruin lives. Second, alternatives are available. For instance, the Capital Good Fund, Navigant Credit Union, and Bank of America all offer small loans, with low fees and interest rates ranging from 5 to 30 percent.
Rhode Island remains the only state in New England with no protections against the payday lending debt trap. It is time to prohibit payday lending and for finance to help local communities build wealth.
The Economic Progress Institute – formerly The Poverty Institute – is a nonpartisan research and policy organization dedicated to improving the economic well-being of low- and modest-income Rhode Islanders. Since the organization was founded in 1999, it has become a respected authority on issues impacting the economic vitality of our residents and our state.