It's Almost a Trap: Homeless and Predatory Financial Exclusion
The Institute for Community Health and Wellbeing has partnered with the San Fernando Valley Rescue Mission (SFVRM) to help the rescue mission to gain a better understanding of the financial circumstances of the families that reside at the shelter. The SFVRM has seen a number of its guests that have large amounts of financial debt, specifically pay day loan debt. Pay day loan debt typically is small dollar amount, short term cash loans but has very high interest rates that are upwards of 100%. The rescue mission was interested in knowing how many of the families they serve are struggling with pay day loan debt.
The Institute for Community Health and Wellbeing collaborated with the rescue mission to develop a research project that could further explore this issue. Dr. David Boyns, Cassidy Owen, and John-Louis Dell developed a survey and put together interview questions that would shed light on an individual’s experience with homelessness, their financial circumstances, and how those two things are correlated.
A total of 14 families from the SFVRM have participated in the survey and 5 families have participated in interviews. The results from the surveys and interviews show that the financial circumstances of individuals definitely play a role in their becoming homeless and specifically in the length of time they have been homeless. Individuals with high amounts of debt often have poor credit which also impacts their ability to secure stable, permanent housing as landlords are often hesitant or unwilling to rent to individuals with poor credit scores.
The surveys and interviews reflect that many individuals are burdened by pay day loan debt. Generally, individuals are living paycheck to paycheck and a financial crisis occurs that requires them to need access to quick money which leads them to pay day loan companies. This sentiment is illustrated by Esmerelda, a single mother who works full time as a receptionist, “I just didn’t have enough money, just living paycheck to paycheck and let’s say something happens, like I have to fix my car or like I don’t know I have to use money and I end up with nothing for a whole week or two weeks and I would have to get a payday loan.”
Kim is a 39 year old, Hispanic, mother of 3 who has her Bachelor’s degree, works full time and has been homeless for 7-12 months. Kim expresses that “The money that I make is mostly to pay for my pay day loans.” Kim has a total of $13,300 worth of debt, $5300 of it is pay day loan debt. One pay day loan for $5000 has an interest rate of 180% and the $300 loan has an interest rate of 165%.
Sandy a single mom of 4 children who left a domestic violence situation and works full time at a temp agency says, “But yeah payday loans are huge, it’s almost a trap. It’s a quick fix but you pay for it in the long term... In a moment of desperation. Because they know people need it now to pay their bills, to keep the car or apartment or home and they aren’t regulated you know, you can take out $300 and end up paying $1500-$2100 in the end.”
It is the hope of the Institute for Community Health and Wellbeing and the San Fernando Valley Rescue Mission to help families gain financial freedom and to help better prepare them for life after the shelter. We also aim to help put a stop to predatory pay day loan companies that prey on the poor and the vulnerable.
The following powerpoint is reflective of the expanded version of the Homeless Finances Study. The Homeless Finances Study was expanded to include other San Fernando Valley Homeless Services Organizations to increase the amount of participants and quicken the data collection process.
Homeless Finance Study Narrative by Cassidy Owen