Having an unscheduled hour during my annual visit with members of our Congressional delegation, I stopped at the U.S. Capitol Visitor Center. In the House of Representatives section of the center, the point was made that its existence was in response to the fact that colonial Americans had been upset about taxation without representation. When ruled by Great Britain, they were angered about how wealth was being appropriated and removed from their communities. They wanted to be involved in decisions that affected them. Yet, that wasn’t happening in colonial America because Great Britain held all the power. And that differential in power was negatively impacting their lives and their communities.
I suddenly realized that the word colony is not just a romantic and neutral historical term – it is actually an emotionally charged economic and political term. Colonialism is about the acquisition, exploitation, and expansion of power in a conquered territory. It’s about unequal relationships between a colonial power and the colony.
Since many of today’s health disparities are due to policies developed in circumstances of unequal power, I began to wonder if the principles of colonialism still exist in the United States. Immediately, the idea of “data colonialism” came to mind. This was a term that was introduced to me by the director of the Minneapolis Urban Coalition 30 years ago. He argued that too often data were mined and removed from the community leaving the community with nothing. Data are a resource that too often benefit the researcher and not the community. He was an early advocate for community-led research and community-owned data in advancing health equity.
At that point, I remembered the Health Impact Assessment (HIA) on Payday Lending that was going to be released on Sunday, March 13. I had read the draft report several weeks earlier and was struck by the devastating impacts of payday lending on low-income communities, particularly communities of color and American Indians. As I studied the displays in the Visitor Center, I realized that colonialism is at the core of payday lending. Payday lending takes resources out of a community and the community is left impoverished. And the poverty is not just about economics – poorer health is also a consequence. Payday lending is a public health issue constructed on the mentality of colonialism.
A payday loan is a short-term loan from an institution that is licensed only to lend but not to accept deposits like banks or credit unions. Payday loan repayment plus interest and fees is required in full, typically about two weeks after the loan is secured.
There were virtually no payday loan stores in the United States until bank deregulation in the 1990s. Before deregulation, locally and community controlled banking systems, such as credit unions and savings and loans helped meet needs of the public. After deregulation, these institutions could no longer compete with the larger, more diversified, and better-funded financial institutions. Today, there are essentially two forms of banking: regulated and insured mainstream banks (few of which are located in low-income communities) and less regulated alternative financial institutions, such as payday lenders and check-cashing outlets, for the poor. The payday lending industry nationally has grown from about $8 billion in 1999 to around $50 billion in 2004.
In Minnesota in 2014 there were 72 payday lenders with the vast majority located in low-income communities. Statewide, these institutions made more than 385,000 loans to about 50,000 borrowers with loans totaling almost $150 million. Most payday loans are made by two national companies. The average loan amount in Minnesota is $390, with borrowers averaging 10 loan transactions a year (new loans are taken out to pay the high interest of previous loans) with an average annual percentage rate (APR) of 252%. Between 1999 and 2014, payday loan fees and interest drained more than $110 million from communities statewide – more than $13 million in 2012 alone.
The HIA notes that “Payday loans contribute to racial/ethnic health inequities by decreasing income, increasing poverty, and making it nearly impossible to build wealth for low- and moderate-income people and people of color…they exacerbate financial insecurity for those who already lack adequate income, are fighting poverty and debt, and are not able to build wealth…Income, poverty, and wealth are key determinants of health and well-being.” Payday lending is a public health issue.
As I left the Capitol Visitor Center, thoughts of colonialism were swirling around in my mind. I wondered how history would have changed if colonialism had not been the basis of economic policy decisions 240 years ago; would a revolution have been averted? I also thought about the policies of today that sustain various forms of colonialism and the impact they have on the disparities that are affecting our communities. I wondered if policies to eliminate credit colonialism manifested in payday lending would help move us toward health equity. I believe the response is yes and that provided a different perspective to my subsequent visits with policy makers.