The Shadow Banks of the Barrio | CityLab

For many Latino immigrants in New York City, an informal network of unregulated loan operators serve as the lenders of last resort. But borrowers soon find themselves buried in seemingly endless debt and haunted by intimidation tactics.

BY Mónica Cordero, Constanza Gallardo, and Alma Sacasa

In Washington Heights, many Latino residents rely on an informal (and illegal) network of unregulated moneylenders. (Photo: Constanza Gallardo)

In Washington Heights, many Latino residents rely on an informal (and illegal) network of unregulated moneylenders. (Photo: Constanza Gallardo)

Maria Ramos holds a large, faded ledger propped open on her lap. The ledger was a gift from a beauty products supplier, an oversized agenda for 2014. Over time, it has become a repository of balance sheets—a record of the debts she’s accrued with neighborhood lenders known as prestamistas. At the moment, she’s paying interest on three loans totaling $14,000. She makes weekly payments, but the debt never seems to drop.

Ramos, 64, owns a beauty salon in Manhattan’s Washington Heights. In order to open her business, she borrowed money from three lenders who charge her 3 percent each week. “I can’t sleep sometimes,” she says, sitting in one of the worn chairs where she cuts her clients’ hair. “I spend the night thinking about the debt.”

Prestamistas serve as underground banks of last resort for many Latino immigrants. In New York City, which has the country’s second-largest Latino population, these unregulated moneylenders are familiar characters in several neighborhoods. Such informal financial services operate in a gray zone that caters to those with no access to credit from traditional sources. But, like the payday loan operations that they resemble, prestamistas charge sky-high interest rates and can swiftly bury borrowers in debt. They also remain cut off from the U.S. financial system, hindering their economic progress and trapping them in a vicious cycle.

Read more: The Shadow Banks of the Barrio | CityLab

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