WASHINGTON (April 8, 2010) – Despite its distasteful reputation in some quarters, the payday lending industry performs an important role in many low-income neighborhoods, and its success exposes a gaping hole in traditional bank services, according to a study released today by The Hispanic Institute.

The new study, “Thinking Outside the Banks: Hispanic Access to Non-traditional Credit Sources,” also cautions against proposed legislation that would greatly restrict the payday lending industry or drive it out of business.

“Our study does not seek to defend the payday lending business. Rather, it underscores the fact that too often there are few other good choices for millions of Latinos and other employed, low-income Americans,” Gus West, board chair of The Hispanic Institute, said in making the announcement.

The study notes that nearly a quarter of the nation’s 48 million Hispanics are “unbanked,” compared to just 9 percent of the overall U.S. population. That is, they do not have ongoing relationships with traditional banks for a variety of reasons, which drives them to the payday lenders, the study reports.

Among the factors cited by the study, which have led Hispanics and other low-income groups to rely on payday lenders, are:

• No proofs of income or established credit history are needed.
• Ongoing banking relationships are not required.
• Locations in their neighborhoods - often not served by traditional banks -- are convenient.
• Extended business hours, 24 hours, 7 days a week in some cases, provide easy access.
• Similar services in their countries of origin are familiar to many recent immigrants.

“It’s not that Hispanics prefer dealing with payday lenders in most cases,” Arnoldo Mata, The Hispanic Institute’s director of research and principal author of the study. “It’s that traditional banking institutions have not reached out to this population in ways that accommodate their needs.”