American women not only earn less than men, but they may be more likely to be sold debt products that carry sky-high interest rates and punishing terms.
Called "pinklining," the trend describes how poor and middle-income women and women of color are more likely to suffer from the ill effects of predatory lending products such as payday loans, according to a new study from three advocacy groups. While men also suffer the adverse consequences of using payday loans and other questionable products, women are more likely to live in poverty than men, making them more susceptible to questionable debt products, the report found.
The payday loan industry has come under fire for its crushing interest rates and unforgiving terms, which can pull borrowers into a prohibitively expensive cycle of borrowing. Six out of 10 payday loan borrowers are women, and women of color, low-income women, and single mothers have high usage rates, according to the new report from New Jersey Communities United, ISAIAH and the ACCE Institute.
"Clearly all predatory lending is targeted toward the poor, and that is a disproportionate number of women," said James Speer, an attorney and executive director of the Virginia Poverty Law Center, who didn't participate in the report but whose center works with people who are struggling with predatory loans.
A "high percentage" of the callers to his center's hotline that provides free help for people with predatory loans are women, he added.
"What I've learned from people in the predatory lending industry is the two big times of year are the beginning of the school year and Christmas," he added. "So many people get these loans to help somebody else out, whether it's their kids or somebody else."
Interestingly, many ads for payday lenders feature women, many of them smiling and holding up cash.
Nevertheless, some data suggests that women may only be slightly more likely to be payday loan customers than men. A study from the Pew Charitable Trusts found that 52 percent are women, said Alex Horowitz, senior officer, small-dollar loans project at Pew.
"Payday loan borrowers are likely to earn less than $40,000 a year, with the average income around $30,000 per household," Horowitz said. Pew's research found that parents are more likely to take payday loans, he added. The average borrower takes out a loan of about $375 and spends $520 in fees to repeatedly borrow that, he added.
Payday lending is only one part of the problem of "pinklining," according to the new report. Other problematic debt products that impact women are subprime home mortgages, with the report finding that women are as much as 46 percent more likely to receive a subprime mortgage than men, and education loans for at-profit colleges, which are more likely to enroll women than men.
If there's an upside to the findings, it's a rather cynical one: the financial sector appears to be profiting handsomely from pinklining. The 12 million Americans who take out payday loans every year spend $9 billion on loan fees, for instance, according to Pew.
"Low to middle income women and/or women of color have few choices and rely on unfair loan products and debt loads for their daily survival and economic security," the report said. "The systemic gaps in resources, opportunities and wages preserved and replaced by pinklining has generated an extraordinary transfer of wealth from women to the financial sector."