“A rose by another name would smell as sweet.” (Romeo and Juliet). Or in the case of predatory lending:  Payday lending by any other name still stinks. Because too many people have learned about the stink of payday lending, the lenders have had to change their products and claim they no longer do that.  But there isn’t enough air freshener available to mask the stench of these loans.

A recent article in American Banker, Payday lenders are making bank on new, high-interest products, tells how lender Enova International (making NetCredit and Cashnet USA loans in Virginia) is making record profits with their new products.

“It’s the same predatory lending schemes in a different package,” said Diane Standaert, director of state policy at the Center for Responsible Lending. “What has remained unchanged for all these years is that the debt trap remains the core of the business model.”

A recent caller to the Virginia Poverty Law Center discovered how well the debt trap works and how devastating it can be.  Gladys Smith (not her real name) called our Senior Legal Helpline  and told one of our attorneys that she was having trouble explaining why she called because she couldn’t stop crying.  She is 79 years old, disabled and scared to death because she thought she was going to be evicted when Cashnet USA debited her bank account for a payment and left her unable to pay her rent.  It turns out that she borrowed $1,000 from Cashnet USA—it wasn’t a payday loan but a “line of credit” loan.  She has been making monthly payments for three and a half years and now owes more than she borrowed.   Her payments total over $8,000! How could that be?  Cashnet USA cleverly manipulates her account with fees and interest charges and additional small cash advances to keep her in perpetual debt.

Thankfully, we helped Ms. Smith get out of this crisis by explaining how she could stop the bank account debits. But how many people don’t get help?  And when is the Virginia General Assembly going to stop letting companies like Enova evade our law by claiming their loans don’t stink like payday loans?