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Don’t Let Holiday Debts Snowball

Don’t Let Holiday Debts Snowball

By Marla Williams, Legal Aid Society

Between gifts, decorations, family meals and travel, the holiday season is more expensive than ever. According to a survey by Deloitte, consumers are expected to spend an average of $1,652 this year on holiday-related expenses.

A sizable percentage of Americans take on debt to pay for costs associated with the holidays. That includes those on low incomes, for whom it can be much more difficult to get back on firm financial footing afterward.

As a consumer law attorney at Legal Aid Society’s Cookeville office, I represent clients across Middle Tennessee who’ve gotten in over their heads financially. Long after the holidays are over, they’re left reckoning with the aftermath of receiving a high-cost loan or amassing an unsustainable level of credit card debt.

While it’s easy to point a finger at the individual for making short-sighted financial decisions, there’s more to the picture than that. The cost of borrowing money has gotten more expensive as inflation concerns have caused the Federal Reserve to raise interest rates. For those with low credit scores, many credit cards are now carrying APRs as high as 25% to 30%.

Even more hazardous are emergency cash loans, which, in addition to an interest rate, have additional fees tacked on that raise their total cost to an exorbitant level.

Here in Tennessee, flex loans have become the dominant form of high-cost lending, representing about 80 percent of the market. One reason is that they’re very fast and accessible, with easy online options. In addition, unlike a traditional loan, they’re essentially an open line of credit, where a consumer might get approved for more money than they request — up to $4,000 in some cases.

Even if a consumer only uses a portion of a flex loan initially, the temptation of additional available money can be difficult to resist — especially when lenders keep dangling it in front of them with regular follow-ups: “You still have money in your line of credit — would you like to come and get it?”

Although flex loans are advertised as having interest rates similar to credit cards, they also include a big surprise for consumers: an additional “customary fee” that can legally be as high as 255% per year, making the loan’s total annual rate a whopping 279%.

With interest and fees piling up faster than they can be paid, many borrowers are forced to take out another loan to pay off the original loan, trapping them in a cycle of debt that continues until they default. Our consumer debt clients often contact us because they’re being harassed by debt collectors, who can be surprisingly aggressive in their efforts to get their money back and collect the fees they have assessed — calling at all hours or implying that a person can be arrested for their debt (which they can’t).

Many clients call us after they have been sued. An issue we deal with frequently is high-cost lenders claiming our clients owe a much higher amount than they actually do. This can happen when the loan company continues to charge the 255% customary fee long after they were supposed to stop doing so.

Legal Aid Society doesn’t offer counseling on getting out of debt. However, we can protect people from being strong-armed for money that they don’t actually owe. If a client legally swears that they don’t owe a particular debt, we put the burden on the debt collector to prove the loan is valid — which they’re frequently unable to do because they’ve bought that debt in a heavily discounted package from the original lender.

If a client has a civil judgment against them, we can also prepare and file documents to protect certain types of personal property from being garnished, such as cars or bank accounts. And we can also help negotiate settlement and repayment agreements with the lender to make the experience of paying back debt less difficult.

If your debt has gotten out of control, please contact us at 800-238-1443 or visit to see if you might qualify for our free legal services.

Marla Williams is the managing attorney of Legal Aid Society’s Cookeville office.