B. Payday Loans Perpetuate the Badges and Incidents of Slavery
Trapped by payday loans, a debtor's ability to escape her marginalized economic and social situation is stunted--a valid Thirteenth Amendment concern. Mobility is restricted, as it takes capital to move, and any of the debtor's extra capital is dedicated to paying off these loans. Payday lenders make most of their money from repeat debtors, which suggests that borrowers' confinement to the debt cycle is not only financial, but also geographical. Debtors cannot make important life decisions such as whether to move, get married, or change professions. The inability of many payday loan borrowers to make such life decisions creates physical isolation and indicates social and economic conditions that present Thirteenth Amendment concerns.
Geographic isolation only perpetuates payday borrowers' poverty and lack of access to resources. Professor Sidhu writes, “Importantly, as a result of their physical isolation and exposure to the conditions within them, including inadequate public education, the probability of modest economic success for the urban underclass is practically a foregone conclusion.” Like “[t]he inability of slaves to move beyond accepted boundaries or travel broadly was a fundamental element of slavery,” the payday debtor is unable to move out of his or her physical location to another that may present better economic opportunities. A large part of this isolation is due to the extreme debt the debtors find themselves in because of payday lenders. This inability to move out of their physical environment is reminiscent of a slave's inability to leave their master's plantation.
The argument for a minimum stake in society posited by Professor Amar also calls for the freedom of movement. Physical immobility is “an additional manifestation of the absence of a nominal stake in society that the Thirteenth Amendment ensures, as the meaningful freedom of movement is a precondition for participation in the modern economy.” Furthermore, debtors trapped by payday loans are not afforded the same opportunities as those with a certain measure of economic wherewithal (i.e., the upper classes), and thus do not have a minimum stake in society. Payday debtors have negative capital that keeps growing negatively due to the nature of the loan. When the poor have a growing negative capital, they become consumed with keeping up with payments, becoming more and more dependent on payday loans. This economic dependency, Professor Amar argues, is what the Thirteenth Amendment seeks to eliminate. When the lower class does not have a minimum stake in society, they are more vulnerable to suffering from the devices and incidents of slavery.
In California alone, repeat African-American and Hispanic borrowers spend $247 million in payday loan fees annually. This takes money away from their communities--money that could be spent on bills or emergency costs, and to keep the borrower out of debt. The Center for Responsible Lending found that payday lenders were about eight times as concentrated in neighborhoods that were predominately African-American and Latino as compared to Caucasian neighborhoods. Seemingly, payday lenders are taking advantage of the physical isolation of poor minorities, perpetuating the badge of slavery identified in Jones--herding minorities into ghettos and inhibiting their economic ability.”
Moreover, the cycle of debt perpetuated by payday lenders is a huge factor in keeping the underclass chronically disadvantaged. Because payday lenders specifically target the underclass, especially the minority underclass, they are exploiting the economic conditions this class lives under. Moreover, payday lenders actively work to keep the underclass “under,” knowing poor people yield the highest profits for their lending institutions.
