Payday Lenders, Pawn Shops, and Check Cashers: A Deeper Spatial Dive

In a previous blog post, we looked at the spatial patterns of bank locations as compared to those of alternative banking service providers (payday lenders[1], pawn shops, and check cashing companies) through the lens of banking deserts and banking swamps. This sequel offers a deeper dive into the communities where alternative providers tend to locate their businesses.

As in the previous blog post, we will use data from the FDIC for the location of banks and BusinessWise for locations of payday lenders, pawn shops, and check cashing companies. Our demographic data come from the latest Census Bureau’s American Community Survey, the 2021 5-year release.

Figure 1 below shows the distribution of alternative service providers overlaid on a map showing poverty by Census tract [2] for the 11-County ARC region.

As Figure 1 shows, payday lenders, pawn shops, and check cashing companies are predominantly found in tracts with higher levels of poverty.

There may be a racial component as well. Figure 2 is the same map as Figure 1, except now with the percentage of the population who are people of color.[3]

Though the population distribution looks a bit different from the first map, the conclusion is basically the same: providers of alternative financial services tend to locate in areas with higher percentages of people of color.

We can quantify this relationship as well: the median alternative financial service provider is located in a Census tract with 12.8% of the population below poverty, when the median tract in the 11-county region has 8.6% of its population below poverty. The median alternative provider is located in a Census tract where 67.3% of the population are people of color, while the median tract has 60.8% people of color. By contrast, banks are located in tracts that are richer and whiter than the region as a whole: 8.3% below poverty and 55.1% people of color.

Footnotes:

[1] As mentioned in the previous blog post in this series, we are using “payday lenders” colloquially to refer to companies that make small, short-term, unsecured loans. True payday lending is not legal in Georgia, but the variety of loans (technically called installment loans) can be similarly high-priced when origination fees are factored in.

[2] Want to learn more about Census tracts? We’ve got you covered! https://33n.atlantaregional.com/mapday/tracking-census-trcts

[3] This is calculated as 100%, minus the number of people who identified as non-Hispanic and White.