Advance Financial traps Tennessee borrowers in cycle of debt

In Tennessee, many borrowers, including Thomas, have reported being trapped in a cycle of debt due to practices by the lending company Advance Financial. By spring 2021, Thomas had paid nearly $4,000 and still owed over $1,000, severely impacting her ability to meet basic living expenses. The company encourages borrowers to reborrow almost the total amount they have repaid, undermining protections established by state laws intended to prevent such practices. Lawmakers aimed to regulate high-interest lending with a 2014 law allowing Flex Loans, yet it neglected to prohibit reborrowing. This loophole allowed lenders like Advance Financial to operate without restrictions on reborrowing, creating a significant financial burden for many borrowers. The legislation initially appeared beneficial, with a 24% interest rate compared to significantly higher rates associated with traditional payday and title loans. However, it turned out that borrowers often faced interest rates ranging from 190% to 210%, which were higher than anticipated. Additionally, the sheer number of lawsuits against borrowers—over 110,000 initiated by Advance Financial since it began offering Flex Loans—highlights the aggressive collection practices being employed. Christopher Peterson, a former senior official with the Consumer Financial Protection Bureau, noted that the trend of reborrowing is indicative of an inability to afford loans, implying a predatory cycle where borrowers remain perpetually indebted. As lawmakers, including House Speaker Cameron Sexton, made decisions that allowed for such practices without imposing crucial limitations, the experiences of individuals like Thomas shed light on the larger issue of high-interest lending in Tennessee. This scenario reveals the significant gap between legislative intent and actual borrower experiences, raising questions about the effectiveness of existing regulations and the future direction of lending laws in Tennessee.