By Patrice Snow
Imagine this: In 1964, a black, single mother raising four small children in rural South Carolina divorces her physically abusive husband for a better life in the state’s capital of Columbia. Imagine, once the woman left said husband, not being able to buy a home on her own because single women, regardless of their race, were not allowed to have mortgages without a husband or a father to co-sign. Imagine, with four children to raise by herself, not being able to access ANY type of credit because unmarried women simply weren’t afforded that luxury in 1964’s America.
This was the story of my fabulous grandmother, the late Ms. Jessie Lee Murdaugh.
Despite the fearlessness of my grandmother and many other women like her not willing to settle for disrespect and abuse from their spouses, there are sadly still thousands of stories like my grandmother’s in America today. And many of these vulnerable women get caught in a trap of predatory payday loans to pay their rent and feed themselves and their dependents. A study found women make up approximately 60 percent of payday loan customers and payday loan use is “even higher among single mothers.”
These payday loans can often lead to a seemingly endless cycle of debt, as one has no choice but to take out a new high-interest loan to pay off the previous one. Rinse and repeat. Or as think tank Center for American Progress put it: “Rather than serving as a lifeline, they are often a leaky life vest drowning families in debt and sinking them into financial ruin.”
And because of systemic gender discrimination pay issues and additional family responsibilities, it is more difficult for women to escape this debt cycle. Furthermore, because the payday loan market is not price competitive, most lenders charge the maximum rate allowed under state law.
If my grandmother were in the same position now that she was back in 1964, she would probably be making around $30,000 per year and if an unexpected bill popped up, she would be unable to pay her rent one month. Because of her struggle and unwillingness to ask her family for help, she might make a trip to a payday lender near Fort Jackson (payday lenders notoriously LOVE targeting military bases for customers) and borrow $300 with an average APR of nearly 400 percent. She’d be typically given two weeks to pay it back.
What person making $30,000 can afford to pay back the loan plus the huge fees on top of it within two weeks and still meet the bills for the next month? It’s simply unrealistic. Throw in another unexpected emergency, and it’s a disaster in the making. It’s this common inability to pay loans back in time that the payday loan industry counts on. In fact, it’s what their entire business model is based on. And it’s wrong.
This is where the government can step in. In 2006, Congress passed, and President George W. Bush signed, the bipartisan Military Lending Act (MLA). The MLA has worked for over a decade to protect service members and their families from predatory lending and financial ruin by establishing a reasonable 36 percent interest rate cap. Because it’s a national standard, soldiers are protected whether they’re based in South Carolina or South Dakota.
And now, a bipartisan coalition of House and Senate members has introduced legislation called the Veterans and Consumers Fair Credit Act that would extend this cap to veterans, Gold Star Families, and all hard-working Americans.
It is up to Congress to pass, and the president to sign, this bipartisan, national 36 percent rate cap bill for all. It would finally give women who are going through the same kind of struggles as my grandmother did the access to affordable credit they deserve without the threat of bankruptcy because of one bad loan.
[Curious about alternatives to payday loans? Read more here.]