In order to address lending disparities that negatively impact Black and Brown communities, we are working to open a retail lending storefront on the East Side of Indianapolis that will provide urgently needed credit access at low interest rates. Level Up Lending's primary goal will be helping clients stabilize then thrive through access to affordable loans. This approach will compete with traditional payday lenders in speed and accessibility, while building in financial safeguards. Level Up Lending will empower consumers through financial tools and community resource referrals. We are currently working to build relationships with community partners to create an effective loan product that will be a complimentary addition to their longstanding programs and services.
What is a Pay Day Loan?
Payday lending is a model that provides high-cost loans to borrowers who may not qualify for a typical personal loan and need money quickly. High interest rates and extremely short payout periods are characteristics of payday loans that often cause more harm to the borrower. These loans are not only difficult to pay back, but often keep low-to-moderate income borrowers in a cycle of debt that is difficult to break.
These predatory lenders are concentrated in low-income Black and Brown communities, exacerbating the effects of redlining that remain largely unremedied.
According to the CFPB report on payday lending, over 80% of payday loans are rolled over or are followed by another loan within 14 days. A quarter to a third of American adults without credit scores are estimated to use payday loans. Similar to those lacking credit scores, payday loan users are more likely to have lower incomes, be people of color, and live in urban and rural areas versus suburban locations.
According to Responsible Lending, "Borrowers who get five or more loans account for 91% of payday lender revenues". The business model of payday loans only works when borrowers are trapped in the cycle.
What are We Doing About It?
We are working to establish a groundbreaking equitable lending model to reduce economic segregation and harms caused by predatory lending in underserved communities.
In early 2025, we plan to open a Payday Loan Alternative Storefront in Indianapolis that helps tackle the financial difficulty caused by taking out payday loans. Access to reasonably priced loan products should not be a luxury only for the wealthy.
In Indiana, the average payday borrower is in debt 5 months out of the year and is 2x more likely to file for bankruptcy.
Indiana loses 70 million annually in payday loan fees alone, which is 70 million out of our communities and into the hands of payday lenders.
The number of brick-and-mortar banks in the United States decreased 14% from 2008-2020 and there is longstanding distrust in traditional financial institutions.
This endeavor will engage with locally operating service nonprofits, faith-based organizations, and local bank branches to create a system of referrals with a central goal of building financial stability and increasing financial mobility.
Interested in learning more about this program? Feel free to contact Tristen Greene on our Economic Empowerment Team!