Virginians caught in the line of credit loan debt trap tell their story
Thursday, January 26th, 2017
R. Z. (DINWIDDIE, VA)
I had fallen behind on rent, and to try to catch up on my bills I got a line of credit from a company called Cash 2-U. My only source of income was my disability check, and I use it to take care of myself and my grandchild. Even though they knew I had a limited amount of money every month, Cash 2-U took money straight out of my bank account without my knowledge. They even sent me a bill for the rest of what I owed after the bank account was empty. I didn’t find out about this until I tried to pay my utility bills and didn’t have enough money for them.
I received multiple calls a day, and they made me feel like something awful would happen to me if I didn’t call them back or come pay. I was desperate and in over my head. I am still behind on my bills because of this, and I haven’t finished paying the loan back.
DONALD G. (RICHMOND, VA)
I live off a $1,300 a month disability check and I am on dialysis. I had fallen behind on some bills, and because of my fixed income, I was worried I wouldn’t have enough money at the end of the month to pay for everything I needed. I went to Advance Til Payday to get a loan after seeing a flyer advertising a $100 loan that I’d have to pay $140 back later on. The ad said it was a deal for less than you normally pay, but when I got to the store the person working there told me I’d actually have to pay $180 back for the $100 loan. I still decided to sign up for it, because they made it seem so easy.
What happened next was when I couldn’t pay the full amount back in time, they tacked on another $80 fee. I never knew the $80 was a monthly fee, because they made it seem like it was just a one-time thing. They called it a participation fee, and I was worried I would never be able to pay it all off. I racked up $320 in fees before a friend of mine stepped in to pay it off for me. I don’t know what I would have done if I hadn’t gotten some help.
J.L. (VIRGINIA BEACH, VA)
When I lost my job, my husband I were falling behind on our bills even though he was still working. We decided to get a small loan to try to catch up, but we did not realize how high the interest rate was going to be. The first loan was for $850, but the interest rate was 264%. To make sure we could make our payments on time, we had to take out loans from other places. It is very stressful to have to go to one place, get a loan, but then go straight to another place to make a payment.
For all of our loans, we cannot get ahead because each payment goes mostly to the interest. The principal barely gets touched, and if you fall behind it’s like your earlier payments didn’t even matter because of the interest and late fees. These loan sharks kill you with the interest. I am working again, but we still can’t get ahead even with two incomes.
JAMES (MECHANICSVILLE, VA)
My wife and I have a limited income, and mostly rely on social security income to get by. I use my 1999 GMC pickup truck for transportation. During a time of tight finances, I was facing some medical bills that we couldn’t afford. I saw an advertisement promising to get me the cash I needed now. I went to Allied Title Lending. The sales representative said I qualified for $2,160, and all I had to do was give them the title to my truck and make my payments. I walked out thinking I had a car title loan – it’s what I asked for, and it was in the name of the store.
I kept paying and paying and paying on it, but the balance never went down. After a year and a half of never missing a payment, my balance was higher than what I first borrowed. When I asked them how this was possible, I never got a straight answer. It wasn’t until close to three years that one of the workers told me I didn’t have a car title loan – I had what they said was a consumer finance loan. By that time, I had paid over $16,000 and the principal amount had stayed the same. I knew I needed to get a lawyer, and I wish I had earlier.
Once I spoke to the attorney, we got the paperwork ready for a lawsuit. We filed it based on the fact that they said they gave me a car title loan, but really gave me a different loan without as many protections as a car title loan. It was why they could charge so much interest and let the payments go on endlessly. If I hadn’t talked to the attorney, I would still be paying on this loan. I couldn’t lose my truck, because I needed it to take care of myself and my wife.
Once we filed the lawsuit, the lender changed their attitude real quick. They offered to give me back all of the interest I had paid if I would drop the suit. That’s what we did, because I needed that money and my truck’s title back. I think these companies need to be forced to write their contracts so you don’t have to be a lawyer to understand what you’re getting into. The average person doesn’t deserve to get sucked into that kind of trap.
P.C. (CHESTERFIELD, VA)
Social security is my only form of income, and it makes my finances pretty tight month-to-month. I had gotten behind on a few bills, and based on some advertisements I went to a store called Allied Cash Advance to see about a loan. I just needed a little help to catch up. When I was talking to the employee, I told them about my income and they assured me they could help me and it would be easy to pay back. Based on that, I signed the papers and was able to borrow $480.
For my first payment, I paid $65, which was within my budget. They took it without any problem. But the next time I went in, they wouldn’t take $65. Instead, they said my payment was $254.37, and that I owed $729.37 total. This was only after two months on a $480 loan. I had no idea why the payment had gotten so high. When I said I couldn’t pay that amount on my social security income, the person there got very rude. The next day, I started getting phone calls. They called multiple times a day, demanding that I pay immediately. I had already explained my income situation to them, and now they just didn’t seem to care. They wouldn’t take the money I tried to pay because it wasn’t the full amount.
My family members also got phone calls as well. The worst was when I got a call saying that if I didn’t pay $600 that day, the sheriff was coming to arrest me. I was so scared. I called the sheriff’s office and they said there was no arrest warrant for me. I decided I needed to call an attorney, who was able to help get these people to stop harassing me.
I think there needs to be laws that make sure these lenders can’t change up your payments so drastically. I still don’t understand how they had me pay $65 one month but wanted over $250 the next. In that time, my balance almost doubled. The harassment needs to be looked into as well. The way they spoke to me and the threats they made worried me to death.
JAMES (RICHMOND, VA)
I get a small amount every month from social security and my pension, but money is always tight. I don’t have a lot of margin for error, but people with a lot more money than me make financial mistakes all the time, so it’s not surprising that I could make a mistake too. That mistake was getting caught in a cycle with payday lenders. I got an open-end credit line at Allied Cash Advance, and ended up paying them three times as much as I borrowed in the end. It was so hard to keep up with payments, because as soon as I made one, I was almost out of money for the month and I needed to get another advance. They keep the cycle going. I was never able to pay the whole thing off and I had to file for bankruptcy. I was also behind on all of my other obligations because of this.
It’s such a problem when you can’t get a loan from a legitimate lender. That’s how these places get you on your back and charge you such egregious interest rates – you can’t go anywhere else. I think they could serve a worthwhile purpose, but the interest rates don’t have to be so outrageous. They can still make a bunch of money with more reasonable rates, and people would be able to pay them back without so much trouble.
ANONYMOUS (RICHMOND, VA)
I had been in debt for some time, and when I found out I had cancer I knew I would need some extra financial help. I took out several payday loans shortly after, each around $500. I needed to make sure I could support myself during treatment. Each application just required basic information, but they never asked about my other debts.
Because the interest rates were so high, I had to take out loans from other payday lenders just to keep up with the original loans. I got caught in a trap. There should be laws that make sure these lenders know someone can pay a loan back. If you’re as desperate as I was, you’ll do anything without realizing how much worse you’re making it on yourself.
D.G. (CHESTERFIELD, VA)
I am living off my retirement and income from two rental properties. I had unexpected expenses come up when I needed to pay for auto repairs and house repairs for my tenants. To make ends meet, I opened up a line of credit at the Loan Store about two years ago. The interest and fees quickly added up, and over the course time I had to take out more loans from other companies to try and make payments. I’ve even gone back to work to try to pay my loans off.
I am now at least a month behind on all of my bills and mortgages, and have had to deal with texts and phone calls threatening legal action if I don’t pay up on my loans. These threats have even come from loan companies who aren’t licensed to do business in my state, which I recently found out makes the loan illegal. I think the government needs to step up and help put an end to these type of loan companies taking advantage of people.
ANONYMOUS (HENRICO COUNTY)
My daughter has had trouble with mental issues and homelessness, and had gotten an open-end line of credit at an annual interest rate of 250%. For privacy reasons, I don’t want to use her name or mine, but I think it’s crazy what they did to her. Once I found out what she had gotten into, I learned she had taken out $400 and paid back over $500, but she still owed more than she had originally taken out. The company got my information and began to call me constantly for months, and they only stopped once I threatened to sue them for harassment.
I hope the Consumer Financial Protection Bureau does the right thing to put an end to these kinds of situations. I have contacted my state legislature and they were no help. I think it’s completely irresponsible to allow businesses like this to exist.
RICHARD (WASHINGTON, D.C.-Virginia loan)
I walked into a trap when I had lost my job and was trying to make sure my family could stay in our home. I got an open-end line of credit and took out $1,500. I told them my circumstances, and they said I wouldn’t be charged interest if I came back within a couple of weeks – they would re-write the loan if I wasn’t able to make the full payment. Based on that, I made the mistake of signing their forms. When I came back, the manager said what I was told earlier was not the case, and that I had to pay that day or my fees would increase. She also threatened me with legal action. I hadn’t even received a contract at this point, but when it came in the mail it was clear that the contract terms were completely different than what was represented to me on my first visit.
I made four payments of almost $500 each, and my balance never changed. They took money out of my bank account without me knowing it was even in the contract. I had to hire an attorney to get a settlement agreement. I still ended up losing the house and had to move in with other family members. I hope the laws on these loans change so that they can’t take advantage of people like this. Every time I went in, there were other people in line getting told the same story that I listened to that first visit.
TIANNA T. (ALEXANDRA, VA)
When I took out a loan from Allied Cash Advance, I had missed several days of work to take my special needs son to the doctor. Without money for those days, I was desperate because I needed to pay my rent. I only borrowed about $300, but I was unable to pay it back because I lost my job soon afterwards. The calls started coming immediately, and I am still getting them four years later. They tell me that they are going to take me to court and that I will go to jail for fraud. I get phone calls at least once or twice a week trying to scare me.
I really think there needs to be changes made for these companies. They target people who really need the money, and then give them high interest rates. They would not work with me when I told them I lost my job – they just told me to make my payments or go to jail. I tried to make partial payments but they would not accept them. I was just trying to keep a roof over my son’s head.
ALEX (MARYLAND-Virginia loan)
I was working in real estate but had fallen behind on some bills. I got a $500 open-end line of credit from Allied Cash Advance, but they did not make it clear to me that I would basically be making interest-only payments. The loan put me in a bigger hole than I was when I started. I think it is ridiculous that they can charge such a high interest rate when all you need is a little help. When I fell behind, they began calling me and making threats that they would send people to my office. I was worried, because I worked in a professional setting and didn’t want to be embarrassed like that.
It took me about a year to pay the loan off. I had to come up with the full amount I borrowed plus the accrued interest so I could make one big payment. I feel like I just gave them $2,000 in the process. I feel like lenders need to be more upfront with you about the interest rate and how much of the payments were only going to interest.
LYNN (RICHMOND, VA)
My only experience with payday loans was a negative one. I needed money to help pay my rent. I was, and still am, working in an operating room, but I was stretched thin. So I went to a local Check ‘N Go for a small loan. I thought I was winning by taking this loan out to pay my rent, but I lost when it came to paying it back. Even though I only borrowed a small amount, the interest rates made my payments very hard to keep up with. I fell behind, and the harassment started immediately. I would get phone calls every day, threatening to come to my work and have me arrested. I was afraid I would lose my job, because even if they didn’t come, the stress made it so that I couldn’t work. I was afraid of being sent home for the day.
I tried to work with them to make affordable payments, but they don’t want to work with you. They terrorize. I’ve noticed that I never see these payday loan stores in nicer areas – they prey on people like me, people who need help the most. We fall for the bait and lose every time. I was trying to do the right thing. I wish I had talked more about my loan, because my daughter ended up getting tied to a car title loan. She was another single woman trying to take care of her kids. Two of them have special needs, and she needed to feed them and keep the lights on. She was also harassed with threats of repossession and arrest. In the end, she paid off more than twice what she borrowed, but she had to park her car in different places every night. The money she borrowed was nothing compared to the money she had to pay back, and she has three kids to take care of by herself.
I think the laws should change to give people like my daughter and myself a better bargaining position. I wanted to work with them and pay them back, but I don’t think I deserve to be threatened with arrest every few days. It’s horrible.
ANONYMOUS (RICHMOND, VA)
Our client is disabled and unable to work, living off social security as her sole source of income. To meet an immediate financial need, she went to Allied Cash Advance to learn about a short-term cash loan. She was told by an employee that they could offer her a line of credit with 0% interest, charging her an $80 participation fee instead of interest. The employee simplified the agreement by telling our client it would be like giving her $100 now and she would have to pay back $180 later. Relying on the employee’s statements, she entered into the agreement.
Our client later learned that the participation fee was actually a monthly $80 fee. As the months went by with her being unable to pay the increasing fee balance, she was also unable to get a monthly statement from Allied Cash Advance. They refused to mail her statement as she requested, instead creating an email address for her to send it electronically. She told them she did not want an email address because she could not afford internet access on her fixed income. Despite her protest, Allied Cash Advance refused to mail her monthly statements so she could keep track of her loan balance.
JOYCE (RICHMOND, VA)
Our client’s sole source of income is $1,257 a month from social security. Facing an immediate financial need that could not be covered by her monthly income, she sought information from Allied Cash Advance about a short term loan. A representative explained that she could get a $580 loan, which she understood to mean a one-time loan to be paid back in equal, monthly installments. Instead, our client was provided a “line of credit agreement and plan” with an annual interest rate of 273.75%. The contract characterizes this loan as an open-end line of credit, but no additional credit was ever available to her.
ANONYMOUS (RICHMOND, VA)
When my car insurance bill was coming up, I knew I wouldn’t have enough money in my checking account. To keep it from being overdrawn, I got a loan from a local store. They said it wasn’t a payday loan, but it was structured so that if you don’t pay the entire thing off in thirty days, the interest will kick in and it will get away from you. What they encourage you do to is pay the balance plus the high fees, then just start it over and get a new loan – with new fees. It became a cycle for me. Because of the fees, I went from needing it to pay my car insurance to needing a loan to pay for groceries, bills, and gas.
Eventually, it came to the point where I knew I couldn’t keep up with the loan. I had always been in contact with them, because they call you before a payment is even due. You have to answer, because if you don’t, they’ll call you at work. When they called that time, I told the woman that there wasn’t enough money in my account. They made me write a check when I got the loan that would cover the amount I borrowed and all of their fees. I told her I couldn’t pay it, and asked her not to deposit the check because it would overdraw my account and cause a returned check fee. She said she had to run it through anyway. This created a series of overdrafts, and I was living with a negative account balance every pay period.
I knew my hands were tied, and I looked for legal help. I wasn’t really sure if I had any legal recourse, because I remember part of my contract saying I wasn’t allowed to hire an attorney if there were any issues with the loan. A sheriff’s deputy had also taped a warrant in debt on my door, telling me to appear in court. I thought they were going to get me. If you’re not used to getting legal documents, it is very intimidating. I feel like they take advantage of people who don’t know they can get legal help with these kinds of cases, because their attitude changed very quickly once they found out I had an attorney.
Based on what I’ve been through this last year or so, they need to shut these places down. It’s a hole that’s too easy to dig yourself in. When you need cash bad enough to go to a place like this, you’re not thinking clearly. They rely on people with that type of need. It’s been a journey for me, but I’ve learned to do without. It’s not worth getting these kinds of loans.