Woman Borrows $500 From Payday Loan Store, Ends Up Owing $1700

A sign outside a 'Speedy Cash' cash loans shop in London, England, on Nov. 1, 2012. Dan Kitwood/Getty Images

A Texas woman said she recently made her tough financial situation even worse by borrowing money from a payday loan store.

Rebecca Anthony lives with her mother, her boyfriend, and her two daughters in Fort Worth. At one point, her mother was fired from her job, she told the Star-Telegram, which hit the family pretty hard.

After getting some help from her church and friends, Anthony’s family was still desperate for cash.

“We were struggling to make bills, so I went ahead and got the loan, and it’s a little bit more long-term than I thought it would be, because I pay on it regularly, but it was only supposed to be for six months,” she said in a video interview with the Star-Telegram.

Anthony said she got a total of three loans this year to pay for food, a car deposit, and other bills. The first was a $1,000 loan, and she’s now paying back $1,500 after fees and interest. The second loan was $600, and she already paid it off, but she ended up paying close to $1,800. She got both loans from an online company.

The third loan was from ACE Cash Express and was for only $490, but she ended up owing close to $1,700. She now pays about $580 per month on her two outstanding loans.

“We ended up getting in a little over our heads, I think. I’m paying almost as much on my loans as I am in rent,” Anthony said.

According to the Texas Fair Lending Alliance (TFLA), payday loans are usually small loans with a high cost.

“They are offered to individuals without a credit check and little consideration of their ability to repay,” states the alliance on its webpage.

These payday loan shops are “marketed on the basis of speed and convenience to people who may feel they have no other options,” states the TFLA. But the high interest and fees make it hard for people to pay the loans off later, creating a “cycle of debt.”

However, the payday loan industry says these companies provide a much-needed service to the community, while regulations harm low-income residents and limit people’s access to these short-term loans. Applying for a loan from a bank can take days or weeks.

The Consumer Service Alliance of Texas states these kinds of Credit Access Businesses (CABs) “allow consumers to change their mind about obtaining a small, short-term loan for three days without charge ... and never threaten or pursue criminal action against a borrower because of a default,” according to its website.

Payday loan shops in Texas also don’t directly provide people with the loans. They only connect the customer with an out-of-state third-party lender.

Although Texas law doesn’t allow lenders to charge more than 10 percent of the loan to customers, a legal loophole has allowed these third-party lenders to charge unlimited interest rates and fees, reported the Star-Telegram. Texas is currently the only state that has this loophole.

“Texas is becoming more and more an outlier across the country in terms of payday loan oversight,” said Ann Baddour of the Austin-based nonprofit Texas Appleseed to the Star-Telegram.

As a result, many cities across Texas have enacted their own regulations. However, Fort Worth may be the last major city in the state that has not passed such ordinances.

In the end, Anthony said she wished there was something else she could have done instead of getting a payday loan.

“Definitely weigh your options first. If you can call a friend, get a loan from them or get help from somewhere else,” said Anthony.