Asha Clark doesn’t have any savings. She works full time. She earns a minimum wage, making phone calls as a customer service representative. In Las Vegas where she lives, that’s $8.25 an hour. Sometimes, her paycheck isn’t enough to cover all her bills. Those are times that Clark would take out a payday loan.
In Nevada, there are more payday lenders than Starbucks and McDonald’s restaurants combined. They provide short-term loans that are meant to be repaid in full when the borrower gets their next paycheck. Each loan comes with fees – for example, about $75 in fees for a $500 loan. The trouble is that when borrowers like Clark get their check and spend most of it repaying the loan, they end up short on cash again. And so they take out another payday loan. Next payday, the same thing happens. The borrowers roll over that same $500 loan every two weeks, each time paying the fee. Over the span of the year, the fees alone can be as much as seven times the size of the original loan.
It’s those fees that got Clark in trouble. The payday lender was automatically deducting the fees from her checking account every two weeks, but the money wasn’t there. That triggered overdraft fees.