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State of Lending in America
The report outlines predatory lending practices in various fields of consumer lending, and explains why protecting fair, affordable access to credit is vital for both consumers and the U.S. economy.

Read the Report

The Victims of Payday Lending

Fact Sheets
Payday Loans

Every day people are devastated by the debt trap of payday loans. Their stories are amazingly consistent. They go to payday lenders out of a short-term need for cash and end up caught for months, even years, paying big fees for small loans without being able to pay them off once and for all. Driven by the fear of bounced checks or by the false threat of prosecution, payday borrowers are forced to pay the loan fees before they pay basic living expenses—like rent, mortgage, electricity... even groceries.

Here are some of their stories:

"At the time it seems like the way out, but this is not a quick fix. It’s like a ton of bricks." Sandra Harris, once a Head Start student, now a well-known and respected member of her community, worked diligently to keep up with her bills. In a tough time, she turned to payday lending. After several rollovers, Sandra’s first loan was due in full. She couldn’t pay it off, so she took a loan from a second lender. Frantically trying to manage her bills, Sandra eventually found herself with six simultaneous payday loans. She was paying over $600 per month in fees, none of which was applied to her debt. Sandra was evicted and her car was repossessed.

"As soon as you get your first loan, you are trapped unless you know you will have the 300 extra dollars in the next two weeks." Lisa Engelkins, a single mother making less than $8 an hour, paid $1254 in fees to renew a payday loan 35 times. Lisa thought she was getting “new money” each time, when in fact she was simply borrowing back the $300 she just repaid. She paid renewal fees every two weeks for 17 months to float a $300 loan, without paying down the loan.

"I felt like I was in a stranglehold each payday. After awhile, I thought, 'I'm never going to get off this merry-go-round.' I wish I’d never gotten these loans."

Anita Monti went to an Advance America payday lending store in hopes of finding a solution to a common problem -- how to delight her grandkids on Christmas. Her response to the payday company’s offers of help ended up costing her nearly $2000 and many months of emotional turmoil.

"I needed the cash to get through the week. It didn't cross my mind that I was borrowing back my own money."

Arthur Jackson,* a warehouse worker and grandfather of seven, went to the same Advance America payday shop for over five years. His total interest paid is estimated at about $5,000 -- for a loan that started at $200 and eventually increased to a principal of $300. Advance America flipped the loan for Arthur over a hundred times, collecting interest of up to $52.50 for each transaction, while extending him no new money. His annual interest rate was in the triple digits. Arthur fell behind on his mortgage and filed bankruptcy to save his home.

"In five months, I spent about $7,000 in interest, and didn't even pay on the principal $1,900. I was having marital problems because of money and didn't know what to do for Christmas for my kid." Jason Withrow, as quoted in a December 2003 account by Russ Bynum of the Associated Press.

Petty Officer 2nd Class Jason Withrow injured his back and lost his second job as a result of a car accident in July of 2003. During a rough patch, the Navy nuclear submariner took out a payday loan. He ended up going to multiple lenders -- for seven loans all told -- to pay the repeated interest fees on his initial advance. Jason’s initial loan was for $300.

After her husband was laid off, Pamela Gomez* borrowed $500 from a payday lender. But the Phoenix, Arizona woman found that she, like many other borrowers, could not manage to repay the $588 she owed ($500 plus $88 in fees) when it was due in two weeks. She went to a second lender to pay the first, and a third to pay the second, getting in deeper until she had five loans of $500. She was paying $880 every month in payday fees, never paying down the principal owed. By June of 2004, she had paid $10,560 in interest on these five loans. She was afraid of going to jail if she stopped paying the fees, and had no idea how to get out of the trap.

Clarissa Farrar and her 15-year-old son put in more sweat equity hours than required on their Habitat for Humanity house, in joyful anticipation of living in their own home. Clarissa works full time, but receives no child support and struggles to manage her expenses. At times she has worked a second part-time job, but when the company she worked for shut down, Clarissa thought payday loans might ease her way. But eventually Clarissa couldn’t repay a loan, and the payday company deposited the check they were holding as collateral. The check bounced and both her bank and the payday lender charged her additional fees for insufficient funds. Now Clarissa’s hopes for a Habitat house are dimmed.

Kym Johnson, a single mother working as a temp in the Triangle area, took out a payday loan when a friend told her about how she could borrow money until her next payday. She quickly fell into the debt trap, and had to pay a high fee every payday to renew the loan and avoid default. When she had trouble keeping up this cycle, she took out a second loan to pay fees on the first. She paid on both loans for about a year, finally convincing one of the lenders to let her pay off the loan in increments. It took Kym another eight months to shake free from the debt trap.

At the most trying time during her experience with payday lending, Wanda Thompson* of Florida owed nine different payday lenders. Every payday, she spent her lunch hour shuffling between lenders to pay fees and keep herself afloat. She quickly fell behind on her car payment and other basic expenses while trying to avoid defaulting on the payday loans. One of the lenders threatened to revoke Wanda’s driver’s license when she could no longer make payments. Wanda finally sought legal advice and pulled herself out of debt, but not until she had stopped payment on some checks and paid bounced check fees on others.

As a grad student in North Carolina’s Triangle area, Allen King* found it very difficult to pay off the four payday loans he had accumulated, since the lenders did not offer installment plans. When he did manage to pay off one or two of the loans, he soon found himself strapped for cash and forced to renew the loan.

Allen finally sought help from a credit counselor. He sent letters to the payday lenders asking for a payment plan he could afford. But instead of helping him work out payments, one of the lenders deposited his check upon receiving his letter, and it bounced twice before he could cancel the check. Two other lenders were internet-based companies who automatically drafted his checking account. He had to close his account to stop them. When one of these lenders received Allen’s payment plan letter, they called and threatened to send a sheriff to his house and serve him court papers. Allen now realizes he has technically repaid the debt several times over in rollover fees.

Rhonda Keller* and her two daughters experienced a financial crisis last summer that sent Rhonda looking for help from payday lenders. She found not the help she needed, but disaster. Rhonda fell into the payday lending debt trap - the terms of the loans she took out required her to either pay them off in less than two weeks or have $90 fees automatically debited from her bank account repeatedly. Those loans, at triple-digit APR, have cost her much more than the exorbitant fees. Her family’s finances are in ruins and she is planning to file bankruptcy.

Like many borrowers, Janis Brown* went to one payday lender to get help paying the fees of another. She ended up borrowing from three different lenders. Since she could not pay the loans in installments, she paid the repeat fees until she got her tax returns. When she couldn’t keep up with the fees one lender demanded, they called and left her a message saying that they would take her to court if her account was short. It was several months before Janis found her way out of the trap, and she needed help from social services during this time, once to pay her rent and twice to pay her light bill.

With retirement and disability income, Mary Hamilton*, a 62-year-old African-American mother and grandmother brings in about $1000 per month. She took out her first payday loan because she needed "a little extra" money to go out of town. Like many borrowers, she had to take out a second loan to pay off the first. She now has loans with four payday lenders. "When I get a little extra money, I'm going to pay them off and I'm through with them," said Mary. "It's a rip off. There's nothing cute about it. I'm supposed to get some money, but I lose money." The fees Mary has to pay to keep from defaulting on her payday loans add up to over 40 percent of her monthly income.

Sandy Hudson’s* first payday loan was for $100, with an $18 fee. She worked down the street from the payday shop, and since she was short on cash, she called to see what she needed to get a loan. All she needed was a source of income and a banking account, so she walked into the shop, and walked out 15 minutes later with the loan. Sandy got caught up in the payday lending debt trap, taking out multiple loans to pay the fees on each one as they became due. At one point, she was paying $300 every two weeks for four different loans. Over a six month period, this added up to $3600, but she was in the trap much longer, paying off one loan, then another, until she lost her job and could no longer keep up with the fees. She filed bankruptcy.

Whitney, who lives in Florida, was caught in the debt trap for nearly three years. During that time, she juggled ten payday lenders, spending her lunch hour going from one lender to the next rolling over the various loans. When she was on the brink of bankruptcy, several lenders bombarded her with threats of revoking her driver's license, turning her in to the Attorney General's office, and filing criminal charges.

Betty, a senior citizen in Durham, North Carolina, paid over half of her $564 monthly Social Security income in payday fees, never paying down her loans. She lost her phone and needed emergency help from social services to avoid eviction.

Edith, an Asheville, North Carolina single mother, cut down on her family’s groceries, stopped driving her car, and kept her lights off to save electricity as she scrambled to pay the fees on her payday loans.

Paula, who lives in Texas with her husband and 3 children, took out some payday loans through lenders on the Internet after her husband lost his job. After he started working again, they were never able to get out of the debt trap due to excessive rollover fees. At one point, $800 a month of the family’s money was going towards payday loans.

Danny, a forklift operator from Kannapolis, NC, paid more than $5,000 in fees to payday lenders over two years. He has over 170 check stubs from payments made to these lenders.

Melissa has had as many as seven payday loans going at the same time. She has recently paid $346 every two weeks in fees alone to carry the payday loans. This New Mexico resident has tried to make payment arrangements with the lenders, but they refuse to work with her.

A Greensboro, NC woman lost her opportunity to buy a Habitat for Humanity home because of her payday debts.

Tennessee resident Natalie has paid over $4000 in fees for $800 worth of loans. Each time that she thinks she is has paid down the principal the lender informs her of more fees that have been piled onto her already steep debt. Additional fees are added every time that she pays late.

Kathy, a North Carolina state employee for 19 years, lost heat and electric service and now works two jobs to pay her payday fees.

Tara, a California woman, took out a payday loan to pay for medicine that her daughter needed. After taking out one loan, Tara had to take out a second to pay off the first. Finally, she had to take another job to pay back the loans.

Maria took out one payday loan three years ago. Now, she is struggling to handle five payday loans and is over $3000 in debt. Most of her budget goes to paying fees to rollover her loans, leaving little money for her to live on the rest of the month. She cannot afford to pay them off.

Karen, a Maryland resident, has paid nearly $2500 for $1000 worth of payday loans. One lender alone has collected $900 for a $250 loan.

*Name changed to protect the borrower's privacy.