Swallowing Us Whole: New Regulations on Predatory Lending Felt in Appalachia

Middlesboro, Kentucky’s “Check Into Cash.” All photos by the author.

In the Borderlands of Appalachia

With a population of 494 people, Cumberland Gap, Tennessee might be the smallest township I’ve visited. According to the American Community Survey, the poverty rate here is 48.2 percent. The 2010 census report contradicts this figure with statistics that show no families live in poverty. Alex Burkhart, a long-time resident of Cumberland Gap, said that most of his friends in the area have profited off of land development and ownership of coal mining lands. Cumberland Gap has no payday lenders within the frame of the mountain walls, while several small towns within a ten mile radius of the border have between five and nine short term lenders. With talk of new regulations on payday lending from the Consumer Financial Protection Bureau and Congress, I traveled to Cumberland Gap to ask residents how these businesses have affected the surrounding area, and to find out whether or not the locals of the working-class border towns believe these storefronts are predatory.

Map of Cumberland Gap, Middlesboro, and Harrogate available here.

After visiting Cumberland Gap, a town tucked away in a valley and nestled in the border of Tennessee, Kentucky, and Virginia, I drove to a bar in Tazewell, Tennessee. Tazewell is several miles south of “The Gap” with around 2,300 inhabitants. The small town is home to nine payday lenders, some with multiple locations within the sprawl. Sitting in a bar in Tazewell, I noticed how strikingly similar the town looked to my own hometown in Alabama. A bartender named Autumn Awtrey began talking to me across the empty counter. She said, “You got to have money to live in ‘The Gap.’” When asked if she had ever taken a payday loan, she responded, “I’ve been in trouble before.”  

“I’ve lived here all my life,” she said. Living in this small Appalachian town comes with its own challenges, particularly when it comes to pills, which is a topic she brought up frequently: “You can look at somebody and tell what kind of drugs somebody’s on.”

When I asked several residents their opinion on payday loans, they too quickly turned the story toward pills. Many of the folks I spoke to said they believed predatory lenders have gripped the border due to the opioid crisis and a decrease in coal mining jobs. They attributed the prevalence of these businesses to the area’s increasing unemployment rate–north of the Gap, Bell County, Kentucky is 9 percent unemployed. They believed pills, combined with unemployment, significantly increased the prevalence of these lenders and have created a toxic recipe for predatory lending to grip the most vulnerable in the community. At the entrance of Angelo’s, a restaurant and bar in Cumberland Gap, residents have taken their own steps to protest Suboxone clinics from opening in the area.  

While residents were quick to open up about the opioid crisis as they mourn their lost family and friends, their relationship to payday lenders was not as oppositional. Predatory lending agencies are one of many institutions, like pain clinics, that prey on the poor. Profiting off the poor is not a new business model, but Joshua Wilkey acknowledges the complications that emergencies and credit scores post to these services: “The poorest members of society have no access to traditional forms of credit. Some even lack access to checking accounts because of low credit scores or a history of financial missteps.” While these lenders do offer banking services that many rural families don’t otherwise have access to, they clearly target poor areas and profit off of cyclical debt.

Trailer in Middlesboro, Kentucky within five minutes of four payday lenders.

The towns of Tazewell and Harrogate, Tennessee are both home to many residents in poverty and many payday lenders. Middlesboro, Kentucky, just north of Cumberland Gap through the Kentucky tunnel, houses seven payday lenders, with a census record of 39.3 percent of residents in poverty. Cumberland Gap, a town bordering two different states and three high-poverty cities, has no payday lenders but offers insight in how state regulations geographically target the poor. The affluent Tennessee town with no lenders neighbors high-poverty towns in Kentucky that are littered with them. Though Tazewell still has many, the Kentucky loan maximums do seem more lenient to lenders. Under current regulation, Kentucky payday lenders can issue a maximum loan of $500 for 14 to 60 days with a maximum APR of 459 percent, with the allowance of no more than two outstanding loans. In Tennessee, the maximum loan amount is $425 for 31 days with the same maximum APR and no more than three outstanding loans per borrower.   

House in Cumberland Gap, the small affluent town with zero payday lenders, within a ten to fifteen-minute drive of the pictured trailer.

When I questioned residents of Cumberland Gap and Tazewell about the new federally proposed regulations on payday lenders, their responses were either unconcerned or supportive of sanctions on predatory lenders. Often, they deemed these businesses hurtful to their community and an enabler of the opioid crisis. Still, many residents, particularly one miner, felt these propositions were government overreach.

New Regulations Shot Down by Congress

In November, the Consumer Financial Protection Bureau published their new lending rules for Payday, Vehicle Title, and Certain High-Cost Installment Loans, set to take effect on January 16 of this year with a full-comply date of August 19, 2018. Almost immediately, the regulatory-disproving Congress issued a statement claiming that these rules “shall have no force or effect,” which will delay the fight against predatory lending for later months or years.

Congress, seeking to abolish regulations on a sweeping level, opened the floor for a battle against the CFPB’s basic underwriting proposal while leaving more impoverished southerners at risk for predatory lending practices. “Stores are concentrated in the South, where consumer lending laws remain loose,” Kai Wright’s reports in her research on southern and Appalachian lenders, but she identifies that these locations continue to grow throughout all American rural states.

The CFPB resolved that payday lenders must adhere to basic underwriting practices and ensure their clients will be able to pay back their loans. The neglect of these practices in most payday lending firms results in threatening collection calls, filing liens with the register of deeds and, at worst, the garnishment of wages. These aren’t overreaching regulations—these are rules that have been adopted by every other mainstream lending source in the country. Kai Wright also claims that although the CFPB has imposed new regulations on subprime lending,“The problem is that most states narrowly regulate specific payday lending activities—say, on how many loans a borrower can take in a given time period—rather than putting broad boundaries on the range of high-cost lending that dominates poor neighborhoods.” In effect, new loan products emerge under different names and continue to target the poor.

A Miner’s Thoughts

In Cumberland Gap, one coal miner named Terry* from Bell County voiced his disapproval of government regulations.

“Fuck the government. Fuck regulation. Let the free enterprise rule the roost. If you can’t afford to pay it, they’re going to come and get your check. They’re going to take your damn money out of your damn bank account. By God, don’t do it if you can’t afford to pay it.”

While Terry disproved of taking out a payday loan, which he deemed spending money you don’t have, he didn’t believe the government’s job was to protect consumers from predatory practices. I asked if he had ever taken out a payday loan. He did, although he didn’t remember the emergency that lead to the withdrawal. “I borrowed $600 for two weeks and it cost me $84” he said.

Terry shook my hand after answering my questions. He didn’t have many fingers on his right hand, so he shook with his left. He told me, “Nobody owes you a damn thing in this world.” I agreed. Nobody owes the shareholders of predatory lenders absolute self-government or impunity as they abuse the working poor.  

*100 Days in Appalachia respects coal miners’ preferences to not be identified by last name in journalistic pieces.

Rachel Bryan (@harl0tt) is a writer in Nashville with a recent Master’s degree in English from Tulane University. Her research focuses on poverty and the working class in Southern literature. Her selected essays can be found here.

Total
0
Shares
Related Posts