As pandemic continues, organizations offer alternatives to payday loan cycle – FOX13 News Memphis

MEMPHIS, Tennessee – Tens of millions of people continue to struggle as the pandemic continues and many are among the millions of Americans who are turning to payday advances to try to make ends meet.

They offer quick cash, but their easy access buries debtors in a cycle that some are unable to escape.

MORE: FOX13 Investigation: MPD Investigations Into Internal Affairs Of Summer 2020 Protests

There are plenty of options for those looking for quick cash, and it doesn’t take much to get a payday loan – usually all you need is a photo ID, a number social security and proof of income.

Still, interest rates create a vicious circle that is difficult to get rid of. However, there are groups that are working to help people do just that.

With an annual interest rate as high as 459%, a loan of $ 200 could end up costing over $ 900.

“This is, for me, the definition of predator. They win when you lose, ”said Andy Posner, founder and CEO of Capital Good Fund, a nonprofit, US Treasury certified community development financial institution.

MORE: FOX13 Gets Real: Murders Are Not Just Numbers; these are families

The Capital Good Fund “helps people settle their finances,” and offers small loans and personalized financial and health care in Rhode Island, Florida, Massachusetts and Delaware, according to its website.

Shelby County is home to the most payday lenders in the state, according to Chattanooga-based independent urban policy research firm Metro Ideas Project.

There are more than 230 payday lenders in Shelby County, according to the firm, nearly double the 109 in Davidson County.

“In order for them to benefit from it, you have to not be able to afford the loan as agreed in the contract,” Posner said in an interview with Zoom. “The only way the lender can make money is if the borrower is worse off at the end of the day than when he started the loan.”

Tens of thousands of people in Memphis are using payday loans. According to the Metro Ideas Project, the people most likely to have used a payday loan are people without a four-year college degree, renters of a home, African Americans, and people earning less than $ 40,000 per year. year.

MORE: State Scholarship, Mentorship Program Still Needs Mentors To Reach 2021 Target

Loans are advertised for emergency expenses, but 70% of borrowers use them for things like car, mortgage; and credit card payments, utility bills, food or rent, according to Metro Ideas Project and the Pew Charitable Trusts.

With extremely high interest rates, Posner said this equates to inequality.

“All of this contributes to what many people call a poverty tax, so that black, brown, indigenous and low-income communities pay more for things that others don’t.”

This is why Posner started the Capital Good Fund.

“I decided to create an organization that would come up with alternatives focusing on marginalized communities and it has grown since then,” he said.

MORE: FOX13 INQUIRY: Does Memphis, Shelby County Need A Witness Protection Program?

Hope Credit Union, a black-owned bank with branches in five southern states, including Arkansas and Mississippi, is another community development financial institution certified by the U.S. Treasury, according to its website.

“A lot of people go there day to day, and they’re not looking for the long haul,” said April Branch, manager of the company’s Ridgeway branch in Memphis.

“A lot of people get stuck in the payday loan cycle, and they feel like they can never get out of it,” Branch said.

Hope Credit Union loans are meant to help people rebuild credit and save, the key to breaking the cycle of poverty in many communities “compared to payday loans, where they’ll just try to get you a loan. another loan just to cover that loan, ”Branch said.

When asked why it would be important to free black people from this cycle, Branch, who is black, said generational wealth creation is an important factor.

MORE: Residents of Harmony Park Apartment say they haven’t had a heating system in months

“Again, I think it’s important that we start using our money financially and find ways to help build generational wealth.”

Branch recalled helping a man refinance a high-interest car loan to save money instead. The man had an 18% interest rate, she said. After the bank refinanced his loan, he was able to start saving.

“I’m trying to break that cycle and get them out of that and get the big picture. … A lot of people think they have $ 5 (and) it’s not enough to save, but you have to start somewhere. “

“If you get into the habit of starting it will help encourage you to save in the future, so when you run into issues with these emergencies you may have some savings set aside that you can use instead of leaving. payday loans. “

A statement was issued to FOX13 by the Consumer Financial Services Association of America on behalf of the Tennessee Consumer Finance Association, the association “representing the licensed consumer financial services industry serving Tennessee consumers,” according to a spokesperson. word.

“The mission of the regulated consumer financial services industry is to ensure that all consumers have access to cost-effective and transparent financial services and credit options when they need them. As community providers, we play a vital role in the lives and livelihoods of millions of consumers and communities that are underserved, neglected or left behind by more traditional financial institutions, helping to enable and strengthen inclusion. and financial stability, ”the statement read. .


Download the FOX13 Memphis app to receive alerts for the latest news in your neighborhood.

CLICK HERE TO DOWNLOAD


Trendy stories:


Source link

About Francis Harris

Check Also

No deposit loans to help ease ‘crippling’ housing problems in remote Queensland

In the Gulf of Queensland region, it has been virtually impossible for locals to buy …

Leave a Reply

Your email address will not be published. Required fields are marked *