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Payday lenders can send borrowers into tailspin. How one woman broke free.

One day, Jennifer Williams borrowed $200. Years later, she was still struggling to escape debt that she called "quicksand." Then she got help.

Working as a teacher in Cleveland, Mississippi, was extremely rewarding, Jennifer Williams said, but she sometimes had trouble making her income stretch from paycheck to paycheck. So one day she borrowed $200, promising to settle up with the lender when she got paid a short time later.

Soon, Williams found herself in a high-cost loan morass that was almost impossible to climb out of.

“It sounds good in the beginning, and when you go in, they’ll do all they can to get you in the system,” Williams told NBC News. “But it’s like quicksand: You try to get out, but you can’t.”

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The “system” Williams is talking about is the payday lending industry, providers of short-term, small-dollar loans with annualized percentage interest rates that can exceed 400 percent. Typically used by workers who run out of money before their next paycheck, the loans are easy to receive, not requiring a credit check, and are offered from storefront locations and online. Whether a borrower can actually repay the loan is typically not a factor considered by these lenders, according to the Consumer Financial Protection Bureau

Jennifer Williams.NBC News

Payday lenders operate across the country but are ubiquitous in Mississippi, where Williams lives. According to the state Department of Banking and Consumer Finance consumer division, there are almost 800 check advance/payday loan operations in Mississippi, more than double the roughly 300 Starbucks, McDonald’s and Burger King outlets there. In Williams’ town, Cleveland, population 12,000, a Google search turned up eight payday lenders versus seven banks.

But Williams finally did pay her loans off, with help from a local bank that offered financial literacy workshops and credit counseling. That bank was Southern Bancorp, a community development financial institution based in Arkansas. Attendees of the bank's financial literacy workshops can receive a low-interest loan after they complete the coursework.

Southern Bancorp.NBC News

“The weekly workshops were on different financial topics,” Williams said, “saving money, looking at your expenses.” She finished the program, and in 2016, after six years, finally paid off all her payday loans.

“We take the financial education empowerment aspect of our operation seriously,” Southern Bancorp CEO Darrin Williams, no relation to Jennifer, said. “We try to be wealth builders for everyone, especially low-wealth people. It’s expensive to be poor — they’re caught in trap after trap.”

‘It’s hard to get out’

Payday lenders and check advance companies say they provide a needed service — giving credit to borrowers who have no other access to funds, sometimes referred to as the “unbanked.” The Community Financial Services Association of America, an industry lobbying group, says 12 million American households use small-dollar loans each year. 

But many consumer advocates consider payday lenders predatory.

“They’re located in the places where people are most in need,” said Beth Orlansky, until recently the advocacy director at the Mississippi Center for Justice, a nonprofit organization that combines policy advocacy with legal services provided to low-income residents. “If you go into the areas where industry has left and people are struggling, you see nothing but payday lenders. It is very strategic.” 

When advertising their products, payday lenders often target Black and Latino communities, according to a study published last month by Jim Hawkins, a professor at the University of Houston Law Center, and a student, Tiffany Penner. The advertising works, the study concluded, with African Americans and Latinos more likely than white customers to use high-cost credit. 

In Jennifer Williams’ experience, payday lenders often provided her first loan at no interest, she said, making it easy to get roped in. When she couldn’t pay off her initial loans, she said she went looking for other lenders.

Jennifer Williams and son.Courtesy Jennifer Williams

Payday loans typically extend for two weeks or less and can be made for as little as $100 and up to $1,000. While these loans are often advertised as helping borrowers through the occasional financial pinch, customers often take on new payday loans to pay off old ones, research shows. A 2009 study by the nonprofit Center for Responsible Lending found that 76 percent of these loans go to customers needing fresh funds to pay off an existing payday loan.

Williams’ experience also followed this pattern.

“I was commuting to work and being paid every month as a teacher,” Williams recalled. “I needed gas money to last until the next pay period. By the end, I had about nine check advances from between five or six locations in three different towns.” 

When her first loan of $200 came due, she said she went to the lender to repay it but wound up increasing the loan to $400, with a $487.50 payoff amount. If she was required to pay that off in a month, the interest rate translates to 264 percent annualized.

“Little do you know, once you get the money, it’s hard to get out,” Williams said. “The average person can’t pay them off.” 

‘A silent battle’

Besides the six-week personal finance course Jennifer Williams took, Southern Bancorp provides other financial literacy and counseling programs. The bank offers advice on saving for a home and how to make the best use of tax refunds. 

“Often the tax refund is the largest check a low-wealth person will receive,” Darrin Williams said, “so we encourage them to save a portion.”

Darrin Williams.NBC News

A Southern Bancorp focus is helping people of color build wealth: 80 percent of recent participants in its counseling programs were Black, for example. Southern Bancorp also offers a program that matches low-income customers’ savings — earmarked for a home, small business or college tuition — with federal funds up to $2,000 per person. Of the participants in 108 such programs, 96 percent were Black. 

Having learned to budget and spend carefully, Jennifer Williams said she is now in a much better place.

“I just recently paid off my car, and so this weight is off of me,” she said. “I’m paying all my bills, living comfortably, no financial stresses. Things are really good.” 

Still, she said her involvement with payday lenders took a toll.

“They prey on the weak and the desperate, the vulnerable people,” she said. “It was emotionally draining, a silent battle I was fighting.”

Almost 20 states have enacted laws to rein in payday lending. The most recent was Hawaii, which last year capped annualized interest rates on payday loans at 36 percent and allowed borrowers to repay early without penalty. Before the law change, a borrower taking out a $300 loan for two months could have paid $210 in finance charges; now those fees are $74, according to an analysis by the Pew Charitable Trusts, a nonprofit organization.

Payday lenders contend that restrictions on these loans, such as imposing interest-rate caps or outright bans on them, wind up harming consumers, because they create problems like bank overdraft fees when checks bounce and even bankruptcy. 

But Lauren Saunders, associate director of the National Consumer Law Center, a nonprofit organization that advocates on behalf of consumers, said research shows borrowers find better alternatives when states rein in payday lenders.

“In places that aren’t doing anything to crack down on it, payday lending is flourishing like never before,” Saunders said.

While government stimulus checks and tax credits during the Covid-19 pandemic helped borrowers reduce their reliance on payday loans, now those programs are ending.

“Payday lending is picking up again,” Saunders said. “Unfortunately, it’s too easy to take advantage of people who can’t make it paycheck to paycheck.”

Meanwhile, the Consumer Financial Protection Bureau said it is on the watch for problem lenders.

“We know these loans can be very harmful, and we have serious and significant concerns about business models where borrowers are set up to fail,” Zixta Martinez, its deputy director, said. “The CFPB will be vigilant and take action where we see abuses.”