MEMPHIS, Tenn. — FOX13 Investigates is focusing on what some said is the dangerous and trapping nature of payday loans.
They are used by people in need of quick cash, but many find themselves unable to pay them back. They can lead to a cycle of debt that a report shows affects mostly black and brown people in Memphis.
A man who was too embarrassed to be publicly identified shared his story with FOX investigates.
“You have one person reaching for a hand and they’re trying to help you up but then they got their foot on your shoulder trying to keep you down,” he said. “In that scenario, you’ll never come out.”
He and his wife said they got stuck in a cycle of the financial debt that started with heartbreak and a need for cash.
“We had three deaths in the family, and we needed some time off. And on being off, we had got behind. So, we thought that we needed to get it so we could catch up,” he said. He said he and his wife took 15 days off work.
He said that’s when he saw a TV commercial for Advance Financial in Millington.
It’s one of more than 100 of what are known as high-cost lenders in and around Memphis, giving borrowers quickly, cash loans, that come with exorbitant interest rates of 280 or 460 percent, amounts allowed under Tennessee state law.
The loan money is recouped by tapping into the borrower’s bank account for regular withdrawals any time there’s money in it, no matter how much money it is, and no matter what other bills it’s needed for.
“They didn’t even talk to us about the interest rate. They didn’t talk to us about 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 going toward loan repayment each month was more than his rent.
A new report by 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 to loans it said are “marketed as a quick financial fix,” but instead “create a long-term cycle of debt.”
“Just because an individual is poor, that does not mean that you ought to exploit that individual,” said Rev. Darrell Harrington, economic chair for the group and senior pastor at New Sardis Baptist Church in Memphis.
The study said there are 114 high-cost lenders in Memphis, double the number of McDonald’s and Starbucks combined.
Of the 114 storefronts counted, 65 percent are owned by nine companies located in other states; 51 of them are owned by just two companies.
“Millions of dollars are finding their way out of the pockets of those who are more vulnerable than if it’s not being reinvested in the community,” said Bill Bynum, CEO of Hope Credit Union, which offers loans with a maximum 18-percent interest, designed to help borrowers rebuild credit.
“Unless they are providing services at a responsible affordable rate and not 400% … they should not be allowed to operate,” Bynum said.
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