South Mississippi nonprofits help break the cycle of debt
GULFPORT -- Local nonprofits and volunteers got a preview Wednesday at the Knight Nonprofit Center of a new campaign to help educate those in financial difficulty on the pitfalls of payday loans and predatory lenders.
The campaign began with a $50,000 grant from the Knight Foundation and the Mississippi Gulf Coast Community Foundation helped secure matching funds and is looking for partners to help get the information to those who need it most.
Paheadra Robinson of the Mississippi Center for Justice said predatory lending is on the rise. Predatory lenders are those with an annual percentage rate exceeding 100 percent. There are 968 payday loan operations in Mississippi. There is no mechanism in place to track the number of loans made or how they affect individual communities.
However, these operations made more than $303 million in 2011, she said.
"Lenders target people who are already struggling," said Robinson.
She said about 60 percent of those receiving these high-interest loans are women. The most common professions of borrowers are teachers and low-wage state employees. Borrowers get sucked into a cycle of debt, she said, when they extend the loans or take out another loan to cover the first.
Borrowers should beware of payday loans; particularly internet-based loans, which can have an APR as high as 1,500 percent; car title loans; income tax refund anticipation loans and rent to own loans, said Robinson.
She said people often take out these loans because they are convenient or they are afraid to go to a bank or credit union because they think they will be denied.
"One guy told me a flat tire was a crisis for him," said Robinson.
Incidents like this can start a downward spiral when predatory lenders become involved and people should know their alternatives, said Robinson. She wants to encourage those in a financial pinch to talk to a local credit union or visit an agency that provides free credit counseling services. Mercy Housing, Climb CDC, Habitat for Humanity, Manna Ministries, Hancock County Resource Center and Hope Community Development Agency are a few that may be able to help.
Those with a household income of less than $50,000 can also avoid refund anticipation loans and receive free tax preparation by calling 211 for a referral.