Memphis a HotBed for Payday Loan Industry
Memphis a Hotbed for Payday Loan Industry
The city of Memphis, Tennessee has become a haven for payday loan shops, housing over 300 such stores within the city limits. In comparison, thanks to recent crack-downs and regulation, the entire state of Washington is home to only 367.
In a startling display of overpopulation, on one two block, half mile section of Summer Ave. there are as many as eight different payday loan stores.
The McDonald’s/ Starbucks-like numbers beg the question,”why?” Why are there so many payday loan lenders in one city? Are they meeting the demands of the population, or are they there to exploit some loop-hole in State payday loan laws?
Critics of the payday loan industry believe that payday loan lenders take advantage of people by advertising their services as “quick fixes” to short-term money problems, but then trap them in cycles of renewing loans with high interest rates.
On the other hand, a spokesman for Advance America, who operates more than 60 stores in Tennessee, argues that cash advance lenders provide services that banks don’t, and help people that banks won’t. There is a huge consumer demand for short-term credit, and banks simply won’t offer those kinds of loans. Payday lenders simply supply a service that is in demand.
The Advance America spokesman claims that 97.5% of their customers pay their full loan back within 48 hours of the due date and that for a loan of $300 the total amount paid in return will never surpass $330.
The State of Tennessee does have specific payday advance laws in place. Under State law, the maximum loan amount is $500, and the maximum loan length is 31 days. Fees can only amount to 15% of the total value of the loan, or $30 – whichever is less. Finally, rollovers – or extensions – are prohibited by law.
According to the office of the Mayor of Memphis, anywhere from 30,000 to 50,000 residents of the city do not use banks, so the Mayor has begun working with local banking officials and the Tennessee Department of Financial Institutions to create short-term and low-cost financial products to enfranchise these people into the banking system.