Colloquia Series - Racial Segregation and Alternative Financial Services in the US

Abstract: Capitalist markets often provide products for disadvantaged groups, but at greater cost and less favorable terms than for advantaged populations. This is especially the case in the context of credit where low-income and racially marginalized groups often lack access to mainstream credit but find access to alternative credit instruments such as high-cost payday loans readily available. However, studying this alternative financial services market has been limited by important data gaps. In this study, we build on prior foundational work connecting racial segregation to exploitation in credit markets by leveraging novel credit report data on millions of US consumers linked to data from an alternative financial services data provider. Our data enable us to (1) analyze spatial dynamics that often cannot be assessed in national surveys, (2) evaluate the role of online markets which have grown to dominate the alternative financial services space, and (3) consider the moderating role of state policy. And as a result, we shed new light on how physical isolation shapes inclusion into high-cost credit markets deepening our understanding of the mechanisms driving inequality in an increasingly financialized American economy.

Davon Norris is Assistant Professor Organizational Studies and Sociology and Faculty Associate at the Stone Center for Inequality Dynamics at the University of Michigan. His work lies at the intersection of economic sociology, urban sociology, and race/racism and seeks to understand how credit, debt, and finance shape patterns of inequality.

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