Survey examines the causes of debt for low-income women of color

Inside Subprime: April 5, 2018

By Lindsay Frankel

The Parents Organized to Win, Educate and Renew – Policy Action Council (POWER-PAC Illinois) recently released a report examining the types of debt low-income families face and the populations most afflicted by the debt cycle.

Members of POWER-PAC, who are mostly women of color themselves, surveyed 304 residents of Chicago and other communities in Illinois. Of those surveyed, 79 percent were women, 53 percent were black, and 37 percent were Latino. Half the respondents were single, and 60 percent reported that their household income was less than $15,000 annually.

Among the important findings, the survey revealed that families with a household income of less than $15,000 had higher rates of debt from payday loans, past due utility bills, and parking/traffic tickets, while more affluent families reported debt from credit cards, mortgage debt, and car loans. Student loans and health care debt were a problem for both groups. The report also states that “Indebtedness thwarts employment, education, finding decent housing, business creation and other economic advancement opportunities,” making it difficult, and often impossible, to overcome.

Furthermore, the report notes that payday lenders in Chicago prey on immigrant families, people of color, and anyone without access to financial support. Language barriers, bad credit or no credit history, lack of identification, and lack of access to financial guidance make these families easy targets for payday lenders.

75 percent of respondents from the low-income group reported that they felt hopeless to get out of debt, and this was due to having insufficient funds to cover expenses, let alone interest rates. Because payday loans have some of the highest interest rates and are often the only option available to low-income families with bad credit, they can quickly perpetuate the cycle of debt, leading to the feelings of sadness and frustration that many respondents expressed.

The POWER-PAC Stepping Out of Poverty (STOP) Campaign made several recommendations as a result of the survey. Suggestions included expanding free and low-cost health care, implementing utility rates that are based on a family’s ability to pay, and regulating predatory payday lenders in Illinois and nationally. The report also recommends scanning for racial inequities in government-imposed fees and fines and spreading the word about debt-reduction programs to families who lack access to financial assistance.

POWER-PAC Illinois has already been successful at eliminating asset limits for temporary assistance, ensuring transparent terms for student loans, and offering financial literacy workshops to help families navigate debt, among other important initiatives. We can only hope that the findings of this survey assist the STOP campaign in ending disreputable practices among payday lenders in Chicago and other communities.

To learn more about payday lending in Illinois, check out these related pages and articles:

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