While many US states have worked to confront the rise of the payday lending industry with bans or regulatory action, the State of California has failed to pursue an adequate policy response of its own. This policy failure has left consumers across the state vulnerable to predatory lending. Californians consistently account for the highest rates in the nation of payday loan borrowing in terms of dollar amount and number of loans disbursed. Typical payday loan consumers are from lower socioeconomic and underserved backgrounds who use the services as an alternativeform of credit. Studies demonstrate that a disproportionate amount of payday loan storefronts conduct business in predominantly Latino and Black communities. Additionally, the State of California does not regulate payday loan providers to the same extent as other traditional consumer financial services, which allows the industry to offer high-risk loans to financially vulnerable populations. Consumers often fall into a "debt trap" of repeated borrowing due to the high interest rates and inability to meet repayment terms. The high prevalence of payday lending in poor communities of color hurts their ability to build intergenerational wealth and stagnates local economic development.
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