Data Shows Payday Loans in Mississippi Lead to Bankruptcy

Inside Subprime: Oct 29, 2018

By Nikolas Wright

There’s no worse place to sing the bankruptcy blues than Mississippi. Two recent reports underscore how payday lending, title lending, and pre-approved checks keep residents of the Magnolia state mired in debt.

A Federal Deposit Insurance Corporation survey released last week found the percentage of “unbanked” Mississippi households rose to 15.8% while the national percentage dropped. “Unbanked” households are those without bank accounts. This is problematic because Mississippians in need of cash turn to payday loans, title loans, and pre-approved checks in the mail instead of traditional banks.

In addition to being unbanked, 37.7% of Mississippi households had no mainstream credit, the highest percentage in the nation. Mississippi routinely has the nation’s highest rates of poverty, income inequality and people without insurance as well as the lowest household incomes, according to Census data. This all makes for a perfect financial storm for many residents from Jackson to Biloxi.

Payday lending and title lending in Mississippi are particular scourges on finances, especially for low income people who cannot access traditional credit. About 1,000 payday lending locations are concentrated in low-income areas or communities of color, according to the Mississippi Center for Justice. That the highest per capita rate in the country, making such communities vulnerable to the debt trap.

Another report from McClatchy’s DC bureau and the Sun Herald found that Georgia, Mississippi and Alabama have seen the most bankruptcies per capita from 2008 to 2018 in which one of the three largest title lenders is named as a creditor.

In that report, one bankruptcy attorney, Michael Ramsay, told the Sun Herald that about 80 percent of his firm’s cases are debtors who have payday loans, with car title loans accounting for a smaller percentage of cases. It didn’t help that Mississippi expanded the scope of lenders who could offer title loans in 2016. This allowed some cash advance companies and check cashing firms to offer title loans as well.

Payday lenders in Mississippi say they’re merely trying to provide cash products to people with bad credit or no credit history.

Mississippi hasn’t done much to help borrowers swamped in debt. In 2016, legislators enacted the Mississippi Credit Availability Act–a misnomer of a law– that approved an APR of 305% for a $500 loan repayable over six months. Exorbitantly high interest rates mean payday loans in Mississippi are risky for low-income borrowers.

The National Consumer Law Center reported that Mississippi joined Tennessee, which amended its lending laws in 2014 to permit lenders to make cash advances at 279%. Together, Mississippi and Tennessee comprise the “Terrible Two”—the two states that have done the most to accommodate predatory lending practices.

If you live in Mississippi, education is your strongest tool in preventing yourself from falling into the grip of a predatory lender. Read our entire subprime report on Mississippi, and our tips for escaping payday lenders.

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