Williams D. Brack

by Williams D. Brack, Special to The New Tri-State Defender

Imagine it’s Monday at 7 a.m. and you just finished preparing your kids for school and yourself for work. You are in your usual morning rush and you all pile into the car. You turn the key and nothing happens.

You are crushed. Payday isn’t until Friday and you just barely make it from check to check. There is no savings for this emergency car repair or anything else. With no friends or family to borrow from, you turn to a payday loan.

With an overall median household income of $38,826, this is the reality for so many in Memphis. People without a four-year college degree, home renters, African Americans and those earning below $40,000 are more likely to have used a payday loan.

Relief is on the way.

According to a memo released by the U.S. Treasury Department’s Office of the Comptroller of the Currency (“The OCC”) in May 2018, Banks can now provide affordable short-term, small-dollar installment lending options that can help consumers with their short-term financial needs.

This means that banks will now compete directly with payday lenders for loans between $300 and $5,000. The Center for Financial Services Innovation reports that U.S. consumers borrow nearly $90 billion every year in these short-term, small-dollar loans. Tennessee currently allows a payday lender to charge borrows up to 459 percent in interest and up to 15 percent of the loan amount in fees.

Tennessee has the most payday lenders in the country with over 1,200 payday lending locations across 89 of Tennessee’s 95 counties. Tennessee has more payday lenders than it has McDonalds and Walmart combined (548). 

Shelby County leads the state, with 232 brick-and-mortar payday-lending locations in the county and Davidson County is second with 109 payday lenders. Shelby County also has the second highest concentration at 24.74 payday lenders per 100,000 residents only behind Madison County with 29.53 payday lenders per 100,000 residents.

Banks will soon be able to provide affordable short-term, small-dollar installment lending options that can help with their short-term financial needs while establishing a path to more mainstream financial products. Banks can also meet credit needs while providing other financial services such as financial education and credit reporting. Consumers benefit when we are offered products with reasonable pricing and repayment structures.

Reducing poverty is one of the many challenges that Memphis, Nashville and the state of Tennessee must prioritize as we look to build a stronger economy. Ensuring that people are not trapped in debt and have lending options that encourage upward mobility will be critical. In the near future, a car repair will be just another bump in the road instead of a roadblock.

(Williams D. Brack is a commercial banker, civic volunteer and community activist.  He can be reached at [email protected])