When Loan Sharks Are the Only Choice

When Loan Sharks Are the Only Choice

Rising bankruptcies and lenders that prey on our most vulnerable citizens are only symptoms of the more ominous issue of poverty in Memphis. For the past eight years, the Women's Foundation for a Greater Memphis has done significant research and has funded more than $1.4 million in grants to address the staggering statistics of poverty that undermines theMemphis economy. Women and children are the hardest hit. The poverty rate among them istwice the national rate, and it is not surprising that the foreclosure rate on Habitat for Humanity's homes in Memphis mirrors the poverty figures. Financial predators are but one of the many obstacles thousands of Memphis citizens face every day.

Consider the example of a single mother of four children who lives in the 38126 Zip Code in South Memphis. In her neighborhood, 98 percent of the children live in poverty. More than half the community's households receive less than $9,000 in income annually, and more than 75 percent of them are headed by single women.

Nothing about these women's lives is easy. To illustrate, let’s look at a hypothetical, but typical single mother who receives $9,000 in welfare assistance each year - $173 a week. She has few skills and when she seeks work, she settles for a job that pays $6 an hour - $240 for a 40-hour week. After she pays for childcare and transportation to work, she finds she brings home less by working than she makes staying at home. Such a woman is one of the many people in Memphis who cannot earn a living wage, and one way or another, we all pay for it.

When her car breaks down, she knows she'll lose her job if it's not fixed quickly. With nowhere else to turn, she resorts to a quick-cash lender, ignoring the costly fees and high interest rates itcharges. She feels she has no choice; with all her energy and income consumed by trying to survive, she's unable to plan ahead for emergencies.

When one of her children unexpectedly requires surgery, the hospital sends her a bill that may easily exceed $10,000. She's not insured, and when TennCare doesn't cover all the expenses for her child's care, the hospital turns the claim over to a collection agency. The collection agency first sends demands for payment, then files suit against her. The court places a lien on any property she owns and garnishees her wages. She must pay the hospital bill, plus court costsand attorneys' fees, or file bankruptcy and face losing her home to foreclosure. She can't turn to a bank for a loan to cover the hospital bill because she has no guarantor to co-sign and her credit isn't worthy. So where can she go for the money? To the quick-cash lender.

Unscrupulous lenders are sometimes the only alternative for Memphians like our single mother, who live in a world most of us cannot imagine. In fact, they once offered the only safety net for the mother of Memphis Mayor Willie Herenton, who years ago turned to a quick-cash lender for the $300 she needed to pay her son's tuition at LeMoyne-Owen College. If that resource had not been there for her, imagine the consequences for Memphis. The complexity of the issues that surround people living in poverty leads us to conclude that there is no magic bullet. Closing down predatory lenders will make us feel better, but it won't address the real problems. Women such as the one I've described do need instruction in financial literacy, but they - and we - also need to address deeper issues, including education, quality child care, affordable healthcare, efficient public transportation and the commitment to earning a living wage.

Over the past 20 years, research has shown that a critical factor in economic development for any community is the empowerment of women. The Women's Foundation works every day to open doors for women like I’ve described. We understand that the quality of their lives affects the future of their children's lives and the future of Memphis.

We would like to lead a discussion about organizing and mobilizing the nonprofit community, municipal government and local elected officials to consider poverty reduction as a priority, especially when making decisions about workforce and economic development. Through an integrated community effort, poverty reduction can be achieved. Then perhaps those whose livelihood depends on preying on our most vulnerable citizens will fall into infamous history alongside the traveling aluminum siding salesmen of days past