Just off Brainerd Road, among a stretch of storefronts that includes nail salons and fast food chains, sits BetterFi, a nonprofit with an ambitious mission to take on the payday lenders who have ensnared thousands of families in the region.
The location is no accident.
“There were eight payday lenders near this office, although one has closed down,” says Spike Hosch, founder of BetterFi. “About 27,000 households in Chattanooga have a payday, title or flex loan. That’s a lot of families.”
Local leaders have wrestled with the problem of predatory lending for decades. But the solutions have been patchwork and ineffective, due in part to state laws that tie the hands of municipalities. And as families in Chattanooga face rising costs and stagnant wages, many are left with few options when an unexpected expense arises.
Hosch says BetterFi offers a way out.
A costly Christmas
To illustrate what BetterFi can do, Hosch shares the story of one of his organization’s first clients in Chattanooga – a woman he calls Jody. On a fixed income of $1,350 a month from Social Security and a pension, Jody took out a $2,000 loan from two nearby lenders to buy Christmas gifts for her children and grandchildren.
She had no idea what she was getting into, Hosch says.
“She made payments of $420, then $500, then $450 over the next few months. Over a year and a half, she paid more than $7,500 – and still owed $2,300.”
The terms of these loans are not just steep – they’re staggering. Flex loans, a relatively new financial product legalized in Tennessee by the 2014 Flexible Credit Act, can carry APRs up to 279.5% (daily fees of 0.7% multiplied by 365 and added to the 24% permitted annual interest). In Tennessee, payday loans under $500 can legally charge an APR of up to 460%.
BetterFi refinanced Jody’s debt. Her new monthly payment? Less than $210. She was debt-free within a year, Hosch says.
“There are thousands of people here in Chattanooga in the exact same situation,” he adds.
In the belly of the beast
BetterFi’s Brainerd Road office stands in what Hosch half-jokingly calls “enemy territory.” But the organization isn’t there to just offer alternatives. It’s also building a coalition.
Nearby are partners like the Family Justice Center and Consumer Credit Counseling – nonprofits that can refer clients to BetterFi and vice versa.
“Consumer Credit Counseling is the legitimate, nonprofit version of the debt settlement and debt management scams that are online,” says Hosch. “They can help people negotiate credit card bills down. We work closely with them.”
Latricia Schobert, outreach coordinator at Consumer Credit Counseling, says she is grateful for BetterFi’s presence.
“Chattanooga needs this program badly,” she says. “We can’t compete with all these predatory lenders. The city tried to make some rules, but the state said no.”
Back in 2015, the City Council, with then-Mayor Andy Berke’s support, proposed zoning restrictions to limit the clustering of payday lenders. The Planning Commission approved the resolution. But a state law passed in 2006 – Tennessee Code § 45-20-110 – prohibits local governments from regulating lending practices directly.
“In 2018, (late councilwoman) Carol Berz tried to pass a rule that prohibited payday lenders from being within a mile of each other,” Schobert says. “But the state wouldn’t allow it.”
Building a beachhead
BetterFi’s office, which opened in April, is staffed by just three people. But it represents a critical step in the organization’s growth. Hosch hopes it will demonstrate a long-term commitment to the community and pave the way for partnerships with other organizations and funders.
“We’ve faced barriers in building partnerships, especially without a physical presence,” he says. “Some of the pushback has come from people who benefit – directly or indirectly – from predatory lenders, or who don’t understand why we charge at all.”
BetterFi is a nonprofit. But it still needs to bring in more money than it spends to be sustainable. Currently reliant on grants and donations, the organization’s long-term vision is to refinance enough loans to fund its own operations.
“Our minimum goal for the first year is to refinance $100,000 worth of payday, title and flex loans,” says Hosch. “We want to get to $1 million. But at any given time, there’s probably $40 to $90 million in predatory loans outstanding just in Chattanooga.”
Hosch admits the scale of the problem is enormous. “Even if we do everything we want to do, it’s still a molecule in a drop of water in a bucket.”
More than money
BetterFi’s services go beyond simple refinancing. The nonprofit reviews each applicant’s income and debt to determine whether refinancing will actually improve their financial situation. In some cases, the answer is no – but even then, BetterFi doesn’t turn clients away.
“There are cases where someone has more money going out than coming in,” Hosch says. “Refinancing won’t help. We’ll analyze their cashflow, see what they can cut, see if they can bring in more income, and maybe revisit the situation in a month.”
If refinancing isn’t an option, BetterFi refers clients to other services, such as credit counseling or Legal Aid.
“Our goal is to never say no,” Hosch says. “Maybe it’s ‘not now,’ but it’s never ‘no.’”
A history of harm
Tina Williams, a BetterFi board member and certified financial educator, has spent 30 years watching the human toll of predatory lending.
“I’ve witnessed the destruction of families and individuals,” she says. “When I learned about BetterFi, I thought, ‘I have to be a part of this.’”
Williams works at Northside Neighborhood House, another Chattanooga nonprofit that provides direct emergency assistance to those in need. She’s seen the ripple effects of high-interest loans firsthand.
“BetterFi can take families out of the grip of predatory lenders and put them in a better situation,” she says. “And hopefully educate people so they don’t find themselves back in a debt trap the following year.”
When asked what might have happened if BetterFi had opened in Chattanooga 10 years ago, Williams doesn’t hesitate: “It could have prevented bankruptcies and divorces.”
The bigger picture
While BetterFi’s current focus is local, its implications are broader. If it can succeed in Tennessee – a state deeply entrenched in the payday loan industry – it could serve as a blueprint for communities across the country.
“The idea is to show this can work,” Hosch says. “We’re not using any of our funds for public advocacy, but if we can build support for an alternative to predatory lending, then maybe the policy changes will follow.”
Tennessee has a long history with payday lending legislation. In addition to the Flexible Credit Act, a 2025 bill – HB775/SB694 – allowed lenders to increase interest rates on small loans to 36%, drawing criticism from consumer protection advocates.
“These laws reflect the tug-of-war between industry interests and consumer protection,” says Schobert. “We’ve seen lawmakers take substantial campaign donations from payday lenders.”
But outside the halls of the Capitol, the consequences are personal.
“We get people calling us who are depressed or threatening suicide,” Schobert says. “They want to do the right thing, but they can’t afford to pay these loans back.”
BetterFi, she says, offers a lifeline.
“They can refinance the debt. People won’t have to let it go to collections. They won’t have to let it destroy their credit. And because BetterFi reports on-time payments, they can even start to rebuild their credit.”
A new path forward
In 2023, the city of Chattanooga launched the Financial Literacy 720 campaign, encouraging residents to improve their credit scores and avoid high-interest debt. It was an important step – but educational programs alone can’t dismantle the debt traps that have already been sprung.
That’s where BetterFi hopes to make its mark.
The organization’s services are available via walk-in or appointment, and clients can even apply online.
Over time, BetterFi plans to track long-term outcomes for its borrowers, including changes in credit scores and financial stability. It’s still early, but the team is optimistic.
“If we can make it work in Tennessee,” Hosch says, “we can make it work anywhere.”