MEMPHIS, Tenn. – FOX13 Investigates focuses on what some have said is the dangerous and trapping nature of payday loans.
They are used by people who need money quickly, but many find themselves unable to pay them back. They can lead to a cycle of indebtedness that, according to one report, primarily affects blacks and browns in Memphis.
A man who was too embarrassed to be publicly identified shared his story with FOX Investigates.
“You have a person reaching out and they’re trying to help you up, but then they put their foot on your shoulder trying to hold you down,” he said. “In this scenario, you will never get out.”
He and his wife said they were stuck in a cycle of financial debt that started with heartbreak and a need for money.
“We had three deaths in the family and we needed time off. And when we left, we were late. So, we thought we had to get it so we could catch up,” he said. He said he and his wife took 15 days off.
He said that was when he saw a TV advert for Advance Financial in Millington.
It’s one of more than 100 so-called high-cost lenders in Memphis and surrounding areas, providing borrowers with quick cash loans at sky-high interest rates of 280 or 460 percent. , amounts permitted by Tennessee state law.
The loan money is recovered by drawing from the borrower’s bank account for regular withdrawals whenever there is money in it, no matter how much money and no matter what other bills he has. requires.
“They didn’t even tell us about the interest rate. They didn’t tell us how much we were going to have to pay back. They didn’t tell us when they were going to start,” he said.
The $1,100 spent on paying off the loan each month was more than his rent.
A new report from the Memphis-based Black Clergy Collaborative and Hope Credit Union, a black-owned bank, sheds light on what the authors call “debt traps.”
The report points out that the loans are, in its view, “marketed as a quick financial solution”, but rather “create a cycle of long-term debt”.
“Just because an individual is poor doesn’t mean you have to exploit that individual,” said Reverend Darrell Harrington, the group’s economic chairman and senior pastor of New Sardis Baptist Church in Memphis.
The study says there are 114 high-cost lenders in Memphis, double the number of McDonald’s and Starbucks combined.
Of the 114 storefronts listed, 65% belong to nine companies located in other states; 51 of them are owned by just two companies.
“Millions of dollars are flowing out of the pockets of those who are more vulnerable than if they weren’t plowed back into the community,” said Bill Bynum, CEO of Hope Credit Union, which offers loans with up to 18% interest. . designed to help borrowers rebuild their credit.
“Unless they’re providing services at a responsible and not 400% affordable rate…they shouldn’t be allowed to operate,” Bynum said.
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