*Names in bold indicate Presenter
To the extent that a lack of knowledge about financial products was responsible for the uneven distribution of subprime loans (and subsequent foreclosures) across communities and demographic groups, the same may be the case for reliance on fringe banking services. Similarly, some have argued that the decision to patronize check cashers and payday lenders is driven not only by the absence of traditional banks in certain communities, but by a lack of trust and comfort with banks. If the subprime debacle further eroded trust in financial institutions in these communities, fringe service providers could benefit.
This paper leverages variation over time within neighborhoods to analyze the relationship between foreclosure activity and changes in the financial services environment across New York State. I find that, indeed, foreclosure activity and applications for new check cashing licenses were concentrated in the same neighborhoods. Furthermore, these neighborhoods tended to have higher poverty rates and larger minority presence. This geographic link between subprime credit and other predatory financial servicers serves as strong evidence for the argument that these actors exacerbate urban inequality. Furthermore, knowledge that communities hit hardest by the Great Recession became even more financially-isolated in its wake provides a strong impetus for wider fair lending and community investment policies.
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