Published by the Virginian-Pilot

I had a relative who needed to borrow $150, so I took out a payday loan to help. Every month, I would have to roll the loan over until the next month, for a $37 fee.

It took great sacrifice, but I was eventually able to pay off the loan. Soon after, another relative needed my help again, and I took out a loan of $300, plus an $87 fee every time I rolled that one over.

I was finally able to pay that one off — and then another family member needed help. Seeing no other alternatives, some of my relatives took out a car title loan, missed a payment and lost their car. Without a car, our whole family suffered. As a single mother and breadwinner for my family, I thought I had no other choice.

I now know that companies selling payday loans prey on people like me, who have limited options for borrowing money and few resources to handle emergencies.

Predatory loans hurt women, especially low-income women and single mothers. Women, on average, earn less than men do. This makes it harder for us to pay our bills and save up for sudden expenses, like medical bills or car repairs.

When there isn’t enough money to pay for emergencies, even small problems escalate quickly. For example, if my car breaks down on the side of the road, and I don’t have enough money to make the repairs, the car will just sit in the towing company’s lot until I can pay to get it out. The fees go up every day, so a bill that might have been around $125 on the first day can quickly wind up costing several hundred dollars. If I didn’t have one day’s worth of impound fees, I definitely can’t afford more than one day.

Single mothers, especially women of color, are more vulnerable to predatory lending than either married mothers or men. According to research by the Pew Charitable Trust, African Americans are 105 percent more likely to take out a payday loan than other races/ethnicities, and people with incomes below $40,000 a year are 62 percent more likely to use these loans.

Women of color are more likely to support children on their own than white women, but also have lower incomes than white women, according to the Center for Global Policy Solutions. This puts a lot of pressure on single mothers like me, when there just isn’t enough money to go around.

Through my volunteer work with Virginia Organizing and the Virginia Poverty Law Center, I have learned about two ways to help people break out of the debt trap.

First is Bank On Hampton Roads, a part of the national program operating all around the country, helping low-income people build up savings and learn more about financial management.

Through Bank On and the Matched Savings Incentive Program, consumers can deposit money in a savings account, and community-funded grants will match the deposit, doubling the savings. This helps create a cushion for low-income people to use instead of payday loans in an emergency. Instead of trying to pay off high-interest loans, Bank On customers can save money and even earn a little interest of their own.

Second, the Consumer Financial Protection Bureau is working to protect consumers from predatory lenders by instituting new rules for underwriting that may include verifying a consumer’s ability to repay the loan or offering restrictions on how often someone may take out a loan before needing a break. That’s stricter than requirements currently in place in Virginia.

While the agency does not have authority to regulate rates or ban the loans outright, the CFPB can help consumers by ensuring that these lenders aren’t preying on people with no ability to repay loans.

Research from the Pew Charitable Trust shows that if payday loans weren’t available, 81 percent of borrowers say they would cut expenses.

Yes, we need options like Bank On for people to learn to budget better and save money for emergencies, but we also need to limit the availability and reach of these loans — loans where borrowers are paying more in interest and fees than they are to pay back the actual loan. Strong consumer protections from the federal CFPB are a good start to reforming this problem.

Debra Grant is a member of the state governing board for Virginia Organizing and serves on the Financial Empowerment Issue Team of the South Hampton Roads Chapter.