Payday Loan Sharks Feed on our Communities
When summer gives way to colder temperatures and we enter the holiday season, sharks will leave their homes and migrate in the thousands in search of warmer waters. But for loan sharks, the cold air sends them into a feeding frenzy, and they’ll stay right where they are–lining the streets of low-income communities, and communities of color.
Several years back while I was working as a mail carrier, before starting my own contracting business, I wanted to give my children the holiday they deserved. But after putting food on the table and paying the bills, there just wasn’t enough left over to provide them with the same gifts that their friends at school would surely boast about receiving.
That was when I waded into the murky waters of payday lending and quickly fell into the grasps of debt that would feed off of my family’s resources for years to come.
I borrowed $500. It was enough to get my kids a few of the more expensive gifts they wanted, and it was an amount I felt comfortable paying back before the end of the 30-day term. The holidays passed and the end of the month came, and unexpected expenses made it impossible for me to repay the full amount. The lender wasn’t concerned, though, and encouraged me to pay just the interest and reinstate the loan for another 30 days for a “small” fee.
And so the story goes, I would pay what I could each month, never making a dent in the $500 principal loan. Interest was accruing at an alarming rate, more than 300% APR, and fees were mounting atop one another and keeping the loan out of default became the best I could do.
Two years later, and over $1000 paid in interest and fees, I still owed the original $500.
The holidays came and went, and those toys I purchased fell to the bottom of the toy bin, but I was still paying for them and would be for the foreseeable future. A Marine and veteran of the Gulf War, I reached out to Department of Veteran Affairs for help. After a series of phone calls and office visits, they were able to help me with my other bills so I could focus on paying down the principal on my loan and finally put the nightmare to rest.
Fortunately, I knew about the support available to veterans in my situation. Without their support, I could still be paying back that loan, and I may never have been able to start my own business.
A dangerous, alpha-predator, payday loan sharks can sink their teeth into borrowers and hold them underwater for years, destroying their credit and creating barriers to the capital necessary to purchase a family home or start a business. For existing small business owners, the damage our local economy is dealt can be just as devastating.
Every dollar that unscrupulous lenders rip from the pockets of unsuspecting borrowers is a dollar that could be spent at local shops and restaurants, or on home renovations and repairs. For small businesses to succeed, we need to retain the wealth of our communities and keep our customers from doing business with those that seek to rob them of their resources.
The Consumer Financial Protection Bureau (CFPB) released a proposed rule earlier this month, however, to rein in payday lending and make business as usual tougher for those who are chomping at the bit to extract wealth from our communities.
This rule represents the first major attempt to curb the harmful practices of the industry. Unfortunately, payday lenders have successfully pushed for loopholes in the proposed rule, and it doesn’t go far enough to protect small business owners and our customers. Over the next 90 days, concerned citizens, victims of the payday lending industry, and small business owners with a vested interest in the collective wealth of the communities they serve will be able to submit comments to the CFPB and urge it to close the loopholes.
Strengthening the CFPB’s rule represents our best chance at repelling payday loan sharks and ridding communities of an industry that has been sapping their resources. Left unattended, they will continue to exploit my customers and neighbors–trapping them in a cycle of debt just as I was, and locking them out of participating in their local economy.
Marzett Hawkins owns Integrity Hawk, a general contracting company in Columbus and is a member of the Main Street Alliance.
