Oct 01, 2013 Sean Albert
When individuals need financial help fast, they don't always head to banks, credit unions or other traditional lenders. In the era after the Great Recession, many people know that unless they have anything but a perfect consumer credit score, there's a good chance their applications won't be approved. Even if they do get approval, it can take some time to get the funds in order.
After all, what other experience do individuals have with these institutions? During the financial tumult, many lenders' doors were shut to everyone who wasn't a sure thing.
The same cannot be said about alternative financial companies, who represented a beacon of hope in an otherwise murky financial landscape. A lot of people were able to use money they borrowed from these companies to make ends meet and contend with unexpected expenses during the height of the recession. But where exactly did they go to secure this funding?
In many areas, consumers headed down to local storefronts to fill out paperwork and obtain short term loans, while other times, they went online to do the same and be nearly automatically approved. Alternative lending entities can be based out of almost anywhere, as we recently found out with the controversy in New York, which involved lenders operating legally out of Native American reservations.
However, recent information suggests that a number of these types of companies are clustered around a specific area in Middle America. Missouri, in particular, seems to be a good place for alternative finance businesses to set up shop.
Pattern emerges during crackdown
The Kansas City Star reported that much of the focus on big players in the short term lending industry has been on companies that operate within the borders of Kansas City. More specifically, the newspaper explained that federal law enforcement officials seem to be cracking down on entities in the area. This, then, signals that all lenders near the metropolis should make sure their employees are always following best practices.
The increased action from Washington has revealed that many of the nation's short term lenders have a presence in the Missouri capital. But the question is: is there a particular element that's drawing lenders here?
Thus far, the answer is no. "Anecdotally there appears to be a concentration of these businesses in the Kansas City area, but we really don't know why," Arkansas Assistant Attorney General Jim DePriest told The Star.
However, the newspaper pointed out that there is a lot of wealth in the area, which makes the city lush for growth. The source explained that lenders need help from investors, banks, lawyers and other professionals, all of which have a significant population in Kansas City.
Borrowers reap the benefits
According to a 2012 report series published by The Pew Charitable Trusts, Missouri residents have been quick to put loans to good use.
Missouri is known as a "permissive state," meaning that there aren't many, if any, restrictions on the industry within the borders. In fact, with the exception of Arkansas, this is the status of all the other states surrounding Missouri. Pew revealed that 11 percent of Missouri residents have taken out at least one of these loans.
The report also painted a picture of the average consumer who seeks out these loans. Most borrowers are white women who are between 25 and 44 years old. They often do not hold a four-year degree, rent their homes and earn below $44,000 per year.
So as Missouri-based companies take a harder look at their practices, they might want to prepare to cater to these individuals, since borrowing is very popular in the area already.