This TN Payday Predator's Relentless Pursuit of Pain
Depleting disability checks, taking more than 100,000 borrowers to court
Payday lending is an insidious game - providing fast access to emergency cash on “easy terms” that often trap borrowers in a cycle of debt.
Tennessee, though, is home to a supposedly “kinder, gentler” payday loan product - the Flex Loan.
One Franklin-based company helped pioneer the flex loan - charging a mere 279% annual interest rate - and even helped usher in the law allowing the product.
Adam Friedman of Tennessee Lookout dug-in to the payday/flex loan giant that is Advance Financial and what he found is disturbing.
Here are some highlights from ProPublica:
Thomas had read her original loan documents warning that the loan carried a high 279.5% interest rate and would be challenging to pay off. But as the loan balance grew, Thomas came to realize she was trapped. By the spring of 2021, Thomas had paid Advance almost $4,000, yet she still owed more than $1,000 and was paying more than $200 a month to cover the interest, depleting the disability checks that were her only source of income.
This borrower’s agony started when she was looking for a little extra cash to provide Christmas gifts for her grandkids.
Andrea Heady, 45, was sued by Advance in Knoxville for over $7,300, despite having paid the company nearly double what she ultimately borrowed. She initially took out $750 through a Flex Loan after the hours at her university job were slashed in June 2020.
As a result of Advance’s win in their suit against Heady: “Ultimately, Heady will end up paying Advance over $14,000 on the $3,850 she borrowed.”
Borrowers often start with a small sum - just enough to handle an unexpected expense. And then, the cycle of not having quite enough keeps them borrowing again and again.
David Hill, a 36-year-old from Nashville, started by borrowing $175 from Advance in February 2020. Each month he would repay the full borrowed amount, including interest and fees, and reborrow the principal, often on the same or next day. Over 18 months, he reborrowed almost 80 times.
And if you don’t pay Advance Financial back, they sue. And to be clear, borrowers have typically paid back all the original principal and then lots more BEFORE Advance gets to the point of filing suit.
The Tennessee Lookout and ProPublica previously reported that the company has sued over 110,000 Tennesseans since it began offering the Flex Loan in 2015, making it one of the largest single plaintiffs in the state. One of the subjects in that story reborrowed on her Flex Loan over a dozen times, turning $4,400 in borrowed cash into more than $12,500 in payments to Advance. The company sued her and won a judgment that led to the garnishment of her wages.