According to the Tennessee Department of Financial Institutions, there are nearly 90 payday lenders operating in the Chattanooga area. Many citizens think that the sight of payday lenders is an embarrassment, and some cities attempted to limit the number of payday lenders within certain borders or zones, but if lenders are not breaking the law, they legally can challenge any of these rules.
Critics say that these payday loans trap borrowers in a cycle of debt with their triple-digit annual percentage rates and fees that amount to $3.4 billion each year, according to the Center for Responsible Lending (CRL). Many of these profits come from "churning," or borrowers taking out one loan to pay for another, or continuously paying interest on a loan without touching the principal. The federal Consumer Financial Protection Bureau reports that 75 percent of payday loan fees are generated from borrowers who took out more than 10 payday loan transactions in a 12-month period. Consumers in the South pay 62 percent of all churned fees, the CRL reports. A Pew survey found that 81 percent of borrowers can cut back on expenses without payday loans, which critics say is a sign that many consumers use payday loans to make unwise purchases. Lenders and even many customers say that the loans sustain consumers, giving them access to credit and allowing them to make car payments or buy necessities in an emergency. Traditional banks are also offering their own forms of payday loans in an effort to reach "unbanked" or "underbanked" consumers. Wells Fargo offers Direct Deposit Advance, Fifth Third Bank has Early Access Now, and Regions Bank offers Ready Advance.