The High Price of Economic Marginalization

Economic exclusion takes many forms including lack of access to financial services. Rates of being underbanked or unbanked are higher in low-income communities and communities of color than affluent, predominantly White neighborhoods. “Alternative” or “predatory” lenders, which charge exorbitant fees, fill “gaps” in services by providing convenient but costly services. We report findings from a community-university research partnership investigating 108 low-income Latinx mothers’ use of alternative lending services (e.g., payday loans, money transfer services), the impact of these services on individuals and families, and barriers and facilitators of mainstream banking use. The majority of respondents had bank accounts but remained underbanked. Frequently cited barriers to mainstream financial services included fees and unexpected charges, uncertainty regarding interest rates, lack of a Social Security number, needing cash quickly, perceived discriminatory treatment, and fear of deportation due to undocumented status. Alternative financial service (e.g., check cashing, cash advance loans) use was widespread as was difficulty repaying these loans. Relational support emerged as an important protective factor against the most exploitative providers. We draw on these and other findings to illustrate how low-income Latinx mothers perceive, experience, and resist predatory lending services. Recommendations for reducing Latinas’ economic exclusion and strengthening financial capabilities are offered.