For the first time in history, young Americans who graduate college with student debt have negative net wealth. Millennials only have half of the net wealth that Baby Boomers had at the same age. These statistics are even worse for young African Americans Millennials: Between 2013 and 2016, homeownership, median net wealth, and the percentage of this cohort saving for retirement all decreased. These factors, along with the fact that 61 percent of Millennials are payday loans in Gahanna unable to pay their expenses for three months compared with 52 percent of the general public, show how prevalent financial instability is for young people. This percentage increases for people of color, with 65 percent of Latinx young adults and 73 percent of Black young adults unable to cover expenses for a three-month period. This is especially troubling given that Millennials and Generation Z are the most diverse generations in U.S. history, with young people of color making up the majority of both groups.
The rules, conceived during the Obama administration and imposed in 2017, required payday lenders to determine whether a borrower could repay the loan while still affording basic expenses
Even as young people are increasingly falling victim to payday lenders, the Trump administration is making it easier for this predatory industry to continue to operate. In , the Trump administration’s CFPB proposed an end to a rule that protects borrowers from loans with interest rates of 400 percent or more. However, the Trump administration’s actions scuttled those safeguards. In 2018, acting CFPB Director Mick Mulvaney sided with the payday industry groups suing the agency to stop these rules by requesting that implementation be delayed until the lawsuit is , the payday lending industry held its annual convention at President Donald Trump’s National Doral hotel for the first time, celebrating the potential end of the rules that were meant to protect its customers. The fate of the rules will likely be . If the decision is in the favor of the payday lending industry, it will be one of the most brazen examples of pay to play under the Trump administration.
Payday lenders are focusing on young people
To no surprise, lenders are taking advantage of young people’s technology usage to increase the likelihood that they will use their services. Young people are the most likely to use apps for their finances: A 2017 survey found that 48 percent of respondents ages 18 to 24 and 35 percent of respondents ages 25 to 34 use mobile banking apps once a week or more. With so many young people turning to popular apps and streaming sites such as Snapchat and Hulu, it is no wonder that a new app-based short-term loan service called Earnin has focused its advertisements on this target-rich market.
Earnin is a smartphone app that gives people access to money they have earned before their payday, with the option to “tip”-a euphemism for paying what is essentially an interest fee, although it is not required-on the app. Earnin is also sometimes referred to as an early wage access provider, allowing access to earned wages between biweekly paychecks all while apparently avoiding typical lending regulations. These regulations include standards set in the Truth in Lending Act, which requires lenders to publish their interest rates.
Earnin reels in young people with advertisements that promise, “Get paid the instant you leave work.” While Earnin does not collect mandatory interest rates like a traditional payday lender, it does rely on the aforementioned tips, which has resulted in the company receiving pressure from regulators who are concerned that Earnin has operated as an illegal payday lender. The tips do not appear much different from interest rates on a traditional payday loan, reportedly sometimes soaring to $14 on a $100 loan. In fact, the app disabled a feature that was available for a short time in New York-one of 16 states and the District of Columbia that outlaws payday lenders-that issued as much as 10 times more in loans to users who voluntarily tipped compared with those who did not.