As told to CRL by the borrowers regarding Advance America payday loans:
Arthur Jackson, 79, a 69-year-old 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 over a hundred times, collecting interest of up to $52.50 each time. Every payday, rather than defaulting or coming up short on bill money, Jackson went into the Advance America store, renewed his loan, and paid the fee. The clerks knew him by name, and often had his paperwork ready for him when he came in.
Anita Monti, 80 an older American, went to an Advance America payday loan store in hopes of finding a solution to a common problem—how to afford Christmas gifts for her grandchildren. Unable to repay both the principal and interest on the initial loan, Monti had no choice but to renew her loan with Advance America every payday, paying $45 many times to keep the same $300 loan outstanding. She went to a second payday lender, Check ‘n Go, to help repay Advance America. Monti could not afford the $820 it would take to pay off the two loans in full and get out of the trap. After just four months, she had paid almost $1,000 in fees and still owed the $820 in principal borrowed. “I got a promotion and a raise, but I never saw any of that money,” said Monti. She finally went to her church for help making her rent payment and to a consumer credit counseling agency for help in negotiating a repayment plan for the payday loans. It took Monti nine more months to complete these payments.
As reported in the Texas Observer: Roger Tillman, a 64-year-old living in Houston, took out a $500 payday loan from The Money Center in 2008 after the security company he worked for scaled back his overtime shifts.
The Money Center currently offers $500 two-week loans for $150 in interest and fees, or about 650% APR. Like many borrowers, Tillman was unable to pay off the loan and thus renewed it, resulting in deepening debt until October 2009, when he was laid off.
He reports that he requested an extended repayment plan but was not given one. In November 2009, the lender filed a criminal complaint against him, demanding that he pay $1,020 within ten days or potentially face felony charges that carry two to 20 years in jail and fines up to $10,000. “In all, the district attorney demanded $1,250, including ‘district attorney fees’ of $140 and merchant fees of $90”—even though Texas law prohibits payday loan companies from threatening to pursue criminal charges against their customers, except in unusual circumstances.
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Mr. B, a Social Security recipient using Wells Fargo’s payday loan program, found himself paying exorbitant interest rates and locked in a cycle of debt that aggravated rather than alleviated financial distress. Mr. B needed help paying off his loans. A review of 39 consecutive monthly statements showed that Mr. B had taken out 24 payday loans of $500, averaging approximately eight days each, with the shortest running just two days and the longest 21 days. The finance charges for these short-term loans totaled $1,200, and their effective APRs ranged from 182 percent to 1,825 percent. Ironically, even though bank payday loans are marketed as a way of avoiding overdraft fees, Mr. B still ended up paying $676 in overdraft penalties on top of the $1,200 in loan fees.
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