Small-dollar lenders, such as Speedy Cash and TitleMax, intentionally design high-cost, low-quality products to make it almost impossible for borrowers to repay their loans under the original terms. Finance fees and average annual interest rates of 400 percent prevent most borrowers from repaying payday loans in full, with borrowers ending up in debt five months out of the year for what was deceptively marketed as a two-week loan. Other loans within this industry are just as harmful. Ninety percent of auto title loans are re-borrowed, and 20 percent of borrowers have their vehicles repossessed. This rule makes it easier for lenders to trap borrowers in cycles of debt.

Payday lenders are well known for taking advantage of the precarious conditions experienced by working-class and poor people — and which disproportionately affect Black and brown people. The average loan amountborrowed from a storefront payday lender is about $1,000. Contradicting the assumption that these lenders profit primarily from unpredictable crises such as a pay cut or medical emergency, a majority of borrowers — 69 percent — rely on payday loans to cover recurring expenses. People use these higher-cost loans to live day-to-day: buying groceries, paying bills, and making their rent or mortgage payments.

Read more here.