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CFPB Narratives Tell Stories of People Caught in the Payday Lending Debt Trap

Adam Rust's picture

Posted July 6, 2015

The CFPB Consumer Complaint Database is now including consumer narratives of their experiences.

The payday loan comments reveal several themes - one of which is that the payday loan trapped the consumer into a cycle of ever-growing debt. As the payday industry likes to say, the consumer did have a short-term emergency. But getting a payday loan transformed a temporary difficulty into a permanent crisis. 

Here are a few, which appear without editing: 

a) We needed money to pay the rent, car, and food for the two months I was without a job. I am not educated with money and we needed money really bad. I borrowed XXXX dollars from XXXX / Cash Call. There was instantly a XXXX processing fee, so I basically borrowed XXXX. Since XXXX 2013, I have been paying XXXX dollars per month. Today, I still owe Cash Call 2,500 dollars. The interest that I am paying against is evil. I will never be able to pay this off. To date, I have already paid approximately XXXX for a $2,300 dollar loan. I do not know what to do. I have paid XXXX the principal of the loan. And I still owe them XXXX. I did not know that this loan would be literally putting me in a mountain of revolving debt that I will never be able to pay off. I would like to report them for convincing me to take out this loan. This is a scam. This has caused major hardships for me and my family. We need your help.

B) I ran into a financial crunch had to borrow some money. I usually borrow from reputable companies. I was online doing a search and I came across Cash USA after reading that it was a revolving account I said that was good I looked at their pricing and it stated that for the XXXX I borrowed my payment would be XXXX monthly or XXXX biweekly. They sent me a statement saying that my XXXX payment was $220 and XXXX weeks later they expected another XXXX. That is absurd who in their right mind would agree to pay someone $300XXXX per month for XXXX when I have borrowed XXXX and my payments wasn't that high. I cannot afford to pay anyone that kind of money. I needed to pay my water bill not get ripped off because I was in need. I have no problem with paying what I borrowed, but to pay that monthly is crazy. I immediately reached out to them by email and phone informing them of the situation they brushed me off as to say oh well you going to pay it. I made the payment of XXXX and that was my last payment because even if I wanted to give them that kind of money my paycheck wouldn't allow it. This company is taking advantage of people that is in need if I had that kind of money then I wouldn't be borrowing any from them. I am trying to get some assistance because I am rebuilding my credit and this is the last thing I need.

Submitted to the CFPB by a third party on behalf of the consumer: 

a) 2014 was the beginning of a long financial struggle for him and his family. When facing difficulty making ends meet, he turned to payday lending. After taking out their payday loan, he fell into the debt trap cycle and has continued to borrow from different lenders in hopes to recover financially. Instead of helping, payday lending has hurt him and his family. The high fees and short time periods to repay have taken a huge hit to his family’s finances. Most recently, he visited a Check 'N Go location in XXXX, California and took out a $3,000 loan where he is expected to make payments of $150 every two weeks. He has had a hard time paying back this loan and has had to make sacrifices in order to make payments. He has fallen behind on water and electricity bills. Even with the high fees and other financial difficulties, he and his family will continue to try to make their payments and stay up to date with their payments as much as possible.

b) Making ends meet was becoming a difficult task for her. When she searched for a way to cover her basic living expenses such as bills, rent, school, and food, she found the online lender RISE. She took out a $500 loan. She was able to steadily pay back the loan, but it was not enough and the added expenses of that loan resulted in her returning for a XXXX loan in XXXX of 2014. This time around she borrowed $3,000 from RISE. She paid the lender $280 every XXXX weeks, and the nearly $600 a month was a big burden for her. She found herself falling behind on bills and rent. Due to her unsteady financial situation she faced eviction and had to leave her home. Paying back RISE was becoming harder to do and the high interest made her debt continue to grow. On XXXX occasions she acquired overdraft fees from her bank because she did not have enough funds in her account to cover the loan payment. She paid $240 in overdraft fees alone. In addition, she received many phone calls from the lender reminding her that her payment was due. Although they were not threatening in nature, they were frequent and inconvenient. She went to family at times to get help paying back the loan, but the debt owed was too big and the added help was not enough. As she fell further behind on her expenses, she knew that she could no longer afford to pay back the loan. In XXXX 2014 she decided to default on the loan after paying $4,000 to the lender for a $3000 loan. She was forced to make arrangements with the bank so that the lender could no longer access her account and take the biweekly payment. At this point, she does not know how much she owes RISE. But she does know that she paid $1,000 in interest and still owes the lender for her loan. She believes that if the interest rate were not so high, she would have been able to pay the loan back without having to default. Unfortunately, that is not the case, and she still has an outstanding debt for a $3,000 loan after paying the lender $4,000.

C) She was facing financial hardships due to her husband losing his job. Their family was losing their home, and they were filing for bankruptcy. In search of a way to stabilize their finances, she took a $5,000 loan from Cash Call. She began paying back that loan slowly, but the interest was too high, and she faced some trouble. It took her XXXX years to pay back Cash Call for this loan. She paid a $20,000, making her fees total $15,000 for a $5,000 loan in an XXXX year period. On XXXX occasion she acquired a $35 overdraft fees due to not having enough funds in her account. She also had to borrow from a friend on some occasions to make her payments. Cutting back on expenses and falling behind on bills caused her to seek more help to pay the loan back quicker and not acquire more interest. She began taking out additional loans from other payday lenders and entering a debt trap cycle. Seeing as her financial situation was not getting better and instead was worsening, she continued to take out loans to pay back Cash Call and stabilize her finances as much as she could. Payday lending has her trapped in a cycle of debt she can't exit. The loans have taken over all her expenses, and it has become incredibly hard for her to imagine when she’ll be able to be completely debt free. She believes these lenders do not give borrowers enough time to pay back the loan and in addition to the high interest rates, it makes it nearly impossible not to fall into the cycle of debt. She says that these loans have become detrimental and she isn't able to save or find a way to bring her finances up to date.