The Payday Lender Hall of Shame

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Cartoon - Shark Infested Waters

Ever wonder why people are concerned about payday loans and some of the companies that make them?  Is it the high interest rates? The debt traps they create for their customers?  Their shady collection tactics?  The amount of money they spend lobbying state legislators in order to protect their profits instead of their customers? Maybe it’s the extra fees they don’t disclose? All of the above?

We’ve compiled excerpts from a few of the articles that highlight some of the worst practices of payday lenders below.  You may also enjoy our compilation of newspaper editorials against payday lenders (click here).

If you are a customer with a complaint about your payday lender, we suggest filling out a complaint with the Consumer Financial Protection Bureau (click here).  The online process is fast, and it’s important for the CFPB to hear when companies are breaking the law, especially since they’re writing rules for payday lenders this year.

A graphic from the Ace Cash Express training manual confirmed advocate suggestions that the payday loan industry profits the most off of people who continualy renew their loans because they can’t afford to pay them off.  The end result?  The consumer pays hundreds or even thousands of dollars for a loan that was originally only a couple of hundred dollars.

ACE Cash Express

 

 

“Over the next five years, those five short-term loans of $500 each would cost him more than $50,000 in interest.” KC man pays $50,000 interest on $2,500 in payday loans (Donald Bradley, Kansas City Star, May 17, 2016)

For her part, Mitchell said she’s done with payday loans, noting that she tells her 12-year-old daughter to stay clear of the products. “I would starve before getting another payday loan,” she said. “I just think it’s robbery.” 1,000% loans? Millions of borrowers face crushing costs (Alain Sherter, MoneyWatch, April 25, 2016)

Judge: $1,820 repayment on $200 loan ‘unconscionable’

Monday’s ruling by Vice Chancellor J. Travis Laster involved a loan that Gloria James of Wilmington took out in 2013 to pay for food and rent. James, who was earning $11.83 an hour as a part-time housekeeper at the Hotel DuPont, went to a storefront business called Loan Till Payday. It is run by National Financial LLC, a Utah company that specializes in small-dollar, high-interest loans. She obtained what the business called a Flex Pay Loan, requiring her to make 26, biweekly, interest-only payments of $60, followed by a final payment comprising both interest of $60 and the original principal of $200. The total repayments added up to $1,820, equating to an annual percentage rate of more than 838 percent. “That level of pricing shocks the conscience,” wrote Laster, who said the loan could be rescinded because it was “unconscionable.” He also concluded that National had violated the federal Truth in Lending Act. (Randall Chase, AP, March 14, 2016).

Report of Examination gives look inside payday lender’s alleged wrongdoing                    Banking examiners say the over-charges are actually “double-charges” the lender collects by requiring a post-dated check from the borrower for the loan amount and fees when a loan is made. The lender gets the double-charge by processing the check through the Automated Clearing House, a nationwide electronic network for credit and debit transactions, while also collecting an in-store cash payment from the customer, according to examiners. All American had an “unwritten” policy of not refunding customers for overpayments, unless and until the customer specifically requested a refund, examiners say. (Ted Carter, Mississippi Business Journal Feb 18, 2016).

As regulators put a price tag — $1.32 billion — on what Scott Tucker’s payday-lending enterprises have squeezed out of poor people, a grand jury convenes  On January 20, the FTC asked a federal judge in Nevada to find Tucker and his companies liable for $1.32 billion. That sum, the FTC says, equals what Tucker’s customers have overpaid above the disclosed costs of their loans since 2008 alone. The FTC’s request to the judge was accompanied by thousands of pages of evidence, unsealed for the first time, that show how Tucker made his money, what he spent it on, and how he has attempted to shield himself from the glare of authorities. (Steve Vockrodt, The Pitch News, Feb. 2, 2016)

EZCorp settles federal payday lending complaint: The $10.5 million charge will be included in the company’s financial statements for the year ended Sept. 30. EZCorp also agreed to forgive all outstanding payday and installment debt, which had already been written off for financial purposes, the release indicates. (Christopher Calnan, Austin Business Journal, Dec 16, 2015).

Justices crack down on high-interest usury The court rejected defendants’ expert witnesses’ view that an 11,000 percent – or even an 11 million percent – interest rate would be acceptable in New Mexico because there is no usury statute.  (Marshall Martin, guest column for Albuquerque Journal, September 1, 2014)

High-Interest payday loans called predatory, but regulations die In Iowa Legislature Contributions from the payday loan industry amounting to over $83 million have poured into state campaigns across the country, according to data from the National Institute on Money in State Politics. The institute shows Iowa legislators have pocketed more than $360,000 from donors associated with the payday loan industry since 1998. (Lauren Mills, Iowa Watch, August 10, 2014).

Payday loan firms drove Samantha’s dad to suicide. But even death didn’t stop them hounding him He killed himself last November, too embarrassed by his debts to seek help. Giving evidence, Samantha told the inquest that after his death her father was sent more than 1,000 texts from loan companies demanding repayment.She has no idea how many texts Ian received before he killed himself, because he’d deleted his phone’s history, but she can’t believe they only started afterwards. She also found letters from payday lenders at his home demanding immediate repayment of outstanding arrears. One, delivered two days after his death, threatened court action and bailiffs unless he paid up.

ACE Cash Express paying $10 million to settle debt collection probe When a consumer “exhausts the cash and does not have the ability to pay,” ACE “contacts the customer for payment or offers the option to refinance or extend the loan.” Then, when the consumer “does not make a payment and the account enters collections,” the cycle starts all over again — with the formerly overdue borrower applying for another payday loan, the bureau said.   (Barry Shlachter, Star Telegram, July 10, 2014)

Will the Government Finally Regulate the Most Predatory Industry in America?  “Jones was almost lucky compared to Thelma Fleming, another Baton Rouge resident who pawned her jewelry, had her checking account shut down and lost her car trying to keep up with a string of loans she took in order to make ends meet after she lost one of her two jobs. “For me, it was devastating,” she said. “It got the best of me to the point where I considered suicide.””  (Zoë Carpenter, The Nation. June 27, 2014).

Payday loans may help, but at what price? “Almost half the borrowers are the people who are have fixed incomes, so they’re never going to have any more than they had this month,” Cook said. “Once they start down the payday loan route, they’re really trapped.” (Eric Schwartzberg, Journal-News. June 23, 2014)

Judgment Day for Payday Lenders  In a 2012 report, the watchdog organization Public Campaign found that the payday lending industry had spent more than $1 million during the previous decade to influence Missouri’s elections. In 2011, the legislature had voted to “cap” the APR for payday loans at 1,656 percent. “Members who voted for this pro-industry bill,” according to the report, “received nearly three times more payday money on average … than members who voted in opposition.” (Theo Anderson, In These Times, June 16, 2014)

McDaniel Files Suit Against Online Payday Lenders McDaniel’s suit says that the defendants issued short-term loans to Arkansas consumers with varying interest rates, but all loans had interest rates that were extraordinarily higher than the 17 percent limit set by state law. One loan had an annual rate of 782.14 percent. Others were 640 percent and higher. ( McDaniel Press Release, June 9, 2014)

Fast loans often come with high price tags  The company Hill used, Progressive Debt Relief, charged him a $25 fee for every $100 he borrowed. When Hill fell behind on monthly payments, the company, which required Hill to submit his bank account number before he could get any money, was able to draw the entire amount of the loan from Hill’s account. “They cleaned me out,” he said. (Susan Sharp, FME News Service, June 8, 2014)

Race-car driver’s payday lending business ‘deceived borrowers’ In a typical case, the company would tell someone borrowing $500 that they would only have to repay $650. But in reality, the company would rely on confusing language deep in the fine print to automatically renew loans borrowers thought they were paying off, the judge ruled. So a $500 loan could actually cost the borrower $1,925.  Navarro noted that the company’s own training material encouraged employees not to explain the true cost of the loan to borrowers.  (David Heath, Center for Public Integrity, June 6, 2014)

payday lobbyist

Payday Lenders Pay Premiums Of course, those weren’t the only ways Cash America and other payday lenders tried to elude the reach of federal investigators. As CREW chronicled in earlier reports, including Payday Lenders Pay More, released in 2011, the payday lending industry ramped up lobbying and campaign contributions over the past several election cycles while unsuccessfully attempting to ward off federal oversight and derail the Dodd-Frank Wall Street Reform and Consumer Protection Act. CREW’s latest analysis shows the industry is still spreading money around in hopes of limiting federal regulation of payday lending.  (David Crockett, Citizens for Responsibility and Ethics in Washington January 14, 2014)

Payday loan managers with Las Vegas ties to pay $100,000 in penalties The managers of an illegal payday loan business with operations in Las Vegas have been ordered to pay $100,000 in penalties and forfeit more than $1 million in outstanding loans, according to a final settlement announced by California regulators.  (Chris Sieroty, Las Vegas Review-Journal, December 25, 2013).

truth in lending crackdown on payday

Banks Must Stop Financing High-Cost Consumer Lenders Some of the retail storefront payday lenders financed by these banks lend those dollars back out to the community at rates of as high as 500%.This type of behavior is a net loss that outweighs many of the good things that banks do elsewhere in communities. (Adam Rust, BankThink Blog, December 16, 2013)

Cashing Out: The Usury Suspects, Part 2 “On average, repeat customers account for 40-50% of the Company’s annual loans,” the overview reads. “The Company’s average customer will borrow ~$1200 (~3 loans) and repay ~$2350 over a 4-year timeframe. Margins on loans to repeat customers average 150% higher than loans to new customers.”  To translate: The average person who takes out a loan from Kimball and Furseth ends up paying back double what he or she initially borrowed. Factor in the 500,000 loans that Evergreen Capital Partners says it has issued since its inception, and a picture emerges: Operators and investors can get pretty rich with a business model like this.  (David Hudnall, The Pitch, December 10, 2013)

How KC’s wealthiest enclaves became a shadowy nexus of predatory lending Over the next five years, Tucker, through CLK, is believed to have pioneered many of the shadowy hallmarks that now define the online payday-loan industry, such as constructing byzantine trails of front companies and merging with Indian tribes to provide his businesses with regulatory immunity. (Only the federal government can sue businesses on tribal lands. That makes it difficult for states to prosecute Tucker when his companies lend at interest rates surpassing the caps they have in place.)  (David Hudnall, The Pitch, December 3, 2013)

Payday lender Cash America fined over claims of robo-signing, gouging military members Problems at Cash America came to light when the bureau conducted its first exam of the company in 2012. Before the visit, examiners told the company to retain documents and call recordings for review. But bureau agents learned that employees were instructed to shred files and erase calls. Employees confessed that managers had also coached them on what to say to examiners, according to the compliant.  (Danielle Douglas, Washington Post, November 20, 2013).

payday vultures I Applied For An Online Payday Loan. Here’s What Happened Next “Once you made that application, you basically sent up a red flag with them that you are someone in need of this money, and you need it on a short-term basis,” he told me. “That’s when the vultures come out.” (Pam Fessler, NPR News, November 6, 2013)

 The Payday Playbook:  How High Cost Lenders Fight to Stay Legal Outrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.  (Paul Kiel, Propublica, August 2, 2013, part of the Debt Inc. Lending and Collecting in America series)

Usury Cartoon RJ Matson St. Louis Post Dispatch Jan 12 2012

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