BALOG COLUMN: High-interest loans aren't worth high stress levels
Carol Wright was afraid to pick up the phone.
The North Charleston woman had six high-interest loans, and her debt had grown to around $5,000. So she got a lot of phone calls reminding her when her payments were due.
“If somebody called me and the name didn't show up, I wouldn't be able to answer my phone,” she said.
But that changed this week. Thanks to some help from her granddaughter, Wright, 66, did something not many people in her situation get a chance to do. She paid off her loans — all of them. She then closed her accounts, and asked the lenders not to contact her anymore.
Even though the state's lending laws were updated in 2009, those regulations addressed deferred payment loans, commonly called payday loans. The law requires deferred payment lenders to check a statewide database before giving a customer a loan, because you're not allowed to have more than one at a time.
And that was true for Wright — only one of her loans was from a payday lender.
In fact, the number of payday lenders has decreased since the law went into effect, said Carri Grube Lybarker, administrator with the S.C. Department of Consumer Affairs. However, many companies moved into the supervised lender arena, which is what most of Wright's loans were.
Now, all this is legal and regulated by the state Department of Consumer Affairs and the State Board of Financial Institutions. But just because it's legal doesn't make it right.
Breaking up is hard to do
“When you're low-income, there are very few choices for you,” said Sue Berkowitz, director of the S.C. Appleseed Legal Justice Center. “There are no other choices other than abusive credit for you to borrow from. As long as you're being made loans you can barely afford, you're going to refinance it.”
For a true payday or deferred payment loan, that can mean a 391 annual percentage rate. For loans from a supervised lender, the rate might be a comparatively lower 43 percent.
Wright looked into consolidation, but not all the lenders would cooperate. Her granddaughter is determined to give her a fresh start, which is why she loaned Wright the money. In return, she's asking for copies of all the contracts saying that Wright's debts are paid in full. She and her husband have worked up a budget for Wright that she should be able to stick to, now that the debts are gone.
“This is a blessing,” she said.
Never going back
At Quick Credit on Dorchester Road, a sign on the door warns customers: “Do not slide cash under the door.”
The woman behind the counter asks “You leaving me?” and “Is everything OK?” when Wright tells her she's closing her account.
Yes, she's leaving, but it won't be easy. “It's hard and tempting,” Wright said. She borrowed to make up the difference on bills — maybe as little as $20 in some cases, but that was enough to start the cycle of high-interest payments.
And it's not just worries about late fees for utilities that have kept her up at night with chest pains. She's afraid the state will come and take away her three grandsons who live with her if she doesn't pay the light bill.
One supervised lender on Remount Road sent her a check that she didn't ask for. “They're the ones that sent me a check, $603, I believe.”
Berkowitz calls that a “hot check.” The law says lenders are prohibited from unconscionable practices, Berkowitz said, and sending a check to someone when you don't know their income or debt would certainly sound unconscionable to many. “I learned from that,” Wright said. “I'm not doing it again.”
After about two hours and visits to six lenders, the last payout is made, and Wright is asked how it feels to be done. “Very good,” she said. “They're sad, I'm happy. I ain't going back to one of them.”
Unfortunately, most people in her situation won't get the chance to say the same.
Reach Melanie Balog at email@example.com