Mississippi Payday Loans Most Pervasive in Low-Income Areas

Inside Subprime: Nov 5, 2018

By Lindsay Frankel

In Mississippi, 19.8 percent of residents have incomes below the poverty line, making it the poorest state in the nation. Unsurprisingly, it’s also the state with the highest concentration of payday loan providers per capita. There are about 1,000 payday lenders in Mississippi, and most storefronts are located in low-income neighborhoods and communities of color.

A payday loan is a short-term loan for $500 or less that is typically scheduled to be paid back on the borrower’s next payday. Payday loans are advertised as an easy way to bridge the gap between paychecks, but the interest and fees associated with these risky loans often lead to insurmountable debt.

Charles Lee, Consumer Protection Director at the Mississippi Center for Justice, said many people turn to payday loans in Mississippi when they have bad credit and lack access to a bank account. He also noted that low-income urban areas are saturated with payday loan providers. <>“In an area off of Highway 80 for example, which is about four or five blocks from Jackson State University, we have about 14 payday lenders in that four-block area, and I don’t think there are any mainstream financial institutions in that area,” he said, adding that payday loan firms intentionally target areas where financially-strained families lack alternatives.

John O’Hara, CEO of the Better Business Bureau in Mississippi, said rural areas are affected as well. Payday lenders set up shop in areas with higher rates of poverty and unemployment, such as the Delta region.

The Consumer Financial Protection Bureau (CFPB) estimates that payday loans cost borrowers an average APR of nearly 400 percent. In addition, payday lenders in Mississippi often engage in a predatory practice known as “loan splitting,” in which the lender will offer two smaller loans at one time in an attempt to earn more revenue from the borrower. And while Mississippi has some laws protecting borrowers from fees, there is currently no imposed interest rate cap.

O’Hara went on to explain that payday loan contracts can be difficult for consumers to understand. He said lenders often mail checks that don’t state interest rates, drawing consumers with the promise of quick cash.

Since a lack of established credit history can lead consumers to take out payday loans, O’Hara recommends that parents help their kids build credit early on. A low-limit credit card can help teach high school students about responsible spending habits in addition to establishing credit.

As the CFPB reconsiders the Obama-era payday lending rule, states are left with the responsibility to protect consumers from predatory lenders. The Mississippi Center for Justice is working in conjunction with businesses, faith-based organizations, and financial institutions to set a 36 percent rate cap on payday loans.

Their website states, “While Mississippi Center for Justice understands the need for small-dollar loans, we oppose a business model that institutes these high interest rates in the nation’s poorest state. The Center is seeking solutions that break the cycle of debt for hardworking Mississippians who become entangled in when borrowing from these lenders.”

For more information on Mississippi payday loans, check out our Inside Subprime Guide to Mississippi including Jackson.


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