Memphis, according to the 2020 census, is home to about 633,000 people, of whom 64.5 percent are African American. As a new report from the Black Clergy Collaborative of Memphis (BCCM) and Hope Policy Institute—the policy arm of Hope Credit Union, a Delta-based community development financial institution (CDFI)—demonstrates, Memphis is also home to an astonishing 114 storefronts of predatory lenders. That is more than one storefront for every 6,000 people.
Those 114 storefronts, the report’s authors emphasize, works out to “more than twice the number of Starbucks and McDonalds combined” citywide (2). This is just one finding in the two organizations’ new report, titled High-Cost Debt Traps Widen Racial Wealth Gap in Memphis, which examines at the micro level how daily extraction of wealth from Black Americans occurs in the city of Memphis, Tennessee.
Memphis, as census data also show, is tied for being the nation’s second poorest big city (500,000 or more people), with a 2020 poverty rate of 24.6 percent. By stripping assets out of low-income and especially Black neighborhoods, predatory interest-rates reinforce this poverty. In Memphis, 45 percent of Black households and over 50 percent of Latinx households are unbanked or underbanked, compared to 15 percent of white households (6). People who lack full bank services, of course, are the people most likely to turn to alternative sources of finance, including predatory lenders.
Memphis in Context: The National Reach of Predatory Lending
At NPQ we have written regularly about the racial wealth gap. Often, the focus is on how to build BIPOC wealth. But no one should lose sight of the fact that BIPOC wealth is stripped from communities every day. As Jeremie Greer of Liberation in a Generation wrote in Shelterforce earlier this year: “The racial wealth gap is a systemic problem, not a product of Black people’s personal choices. And no matter how many wealth-building opportunities we create for Black people and other people of color, these efforts will never deliver if we leave the wealth-stripping processes intact.”
One of the processes that Greer describes is predatory lending—loans with triple-digit interest rates. According to an article published by the Federal Reserve Bank of St. Louis, “payday lending” is a $9 billion market. As economist Jeannette Bennett writes, on average “the typical $375 loan will incur $520 in fees because of repeat borrowing.” If one adds check cashers and related enterprises, the size of the predatory lending industry is even larger. One estimate puts the number at $19.1 billion. Black and Latinx families are disproportionately affected. And as a recent study by Jim Hawkins, a University of Houston law professor, and Tiffany Penner, a recent law school graduate, published in the Emory …….