The Center for Responsible Lending, whose founders are on the list of 25 people to blame for the economic crisis, released a flawed study on payday loans today. In it they claim that payday lenders in California are targeting minorities.

My oh my, where to begin with this disaster. I suppose we can begin with the study itself. The Senior Researcher for CRL is named Leslie Parrish. One might suppose that a Senior Researcher has a strong background in research, academics, statistics and mathematics.

Parrish received her Bachelor of Arts in Public and Urban Affairs from Virginia Tech. Then she received her Masters Degree in City and Regional Planning from the University of North Carolina at Chapel Hill. Public and Urban Affairs? City and Regional Planning? How was Parrish trained to be any kind of researcher?

Oh right, there's that little note at the bottom of their website that says they may partner with other organizations and institutions in its research. Translation: no one at CRL can do research, so they pay other people to do it and put their own spin on the results.

Need an example? After breezing through the results and data in their presentation, they say this absurdity: "The average California borrower takes out 10 loans a year (likely on a consecutive basis.) This debt trap costs the borrower nearly $450 in fees for $255 in credit."

My best guess is that they suggest here that the average loan is for $255 and costs the borrower $450 in fees. They claim the average APR is 459% in California, so it would take 140 days for $255 to get $450 in fees. That's almost 5 months of not paying the loan back.

Is the real problem here the APR? Is it? Are the payday lenders the bad guys here? Are they ripping everyone off? Or could it possibly be that some borrowers are completely lacking in responsibility. Five months to pay back a two week loan? That's just ridiculous.

Here's the kicker though. Their analysis says that African Americans and Latinos make up about 55% of payday loan borrowers in California. The whole point of the study is that payday lenders set up shop near minorities, right? That payday lenders target minorities?

Well, the study claims that payday lenders are 2.4 times more concentrated in minority communities. And that is supposedly after isolating the race variable. (Which by the way is statistically impossible to do.) Wouldn't any rational person assume that if payday lenders are found 2.4 times more often in minority communities that this would mean minorities use payday loans something like 2.4 times more than whites?

Not even close. Its 45% to 55%. That is about 1.2 times as many minorities as whites. Let's illustrate the point.

Suppose we have 100 payday loan borrowers. 55 are minorities, 45 are white. Now we have 10 payday lenders. Since the researchers magically isolated race as a factor and said as an isolated variable that payday lenders are 2.4 times more clustered in minority communities, we can say 3 payday lenders set up near the 45 white borrowers, and 7 set up around the minority borrowers.

Suppose all stores attract borrowers equally. The ones in the white neighborhoods will attract about 15 people in each store. The ones in the minority neighborhoods will bring in about 7-8 people in each store. Doesn't it then make good business sense to set up shop in the white neighborhoods? So why in California is this apparently not what payday lenders are doing?

Because quite simply, payday lenders aren't targeting minorities. The foot traffic needed in each store to stay in business amidst so much competition is a lot. It seems that regardless of the payday lender's location, they seem to be attracting borrowers of all races, even though they are closer to African American and Latino neighborhoods.

The target market for payday lenders are people who need cash quickly, in small sums, for short periods of time and who don't have access to any other type of credit. People like that tend to not be wealthy, not own a home and not have great credit history.

Payday lenders are not sitting in rooms around the country talking about how they can target minorities and exploit them. Locations are decided upon based on how much exposure they will receive from potential customers. Payday loans are blind to race and shame on the irresponsible CRL for suggesting otherwise.