Aziza Gary grew increasingly uncomfortable.
Here she was, a lending specialist for a credit union in Baltimore, advising a member to steer clear of payday loans. Gary knew these loans were a bad deal from her years in banking. She even briefly worked for a company offering payday loans and had seen consumers unable to escape the cycle of these high-cost, revolving resources.
But the more the credit union member gushed with gratitude for Gary’s sage advice, the more Gary squirmed.
The truth was Gary had three outstanding payday cash loans. A big chunk of each paycheck went to finance these loans. She was behind on her rent and utilities. And the single parent barely was able to put food on the table for herself and her young daughter.
“In the back of my head I’m saying, ‘You’re such a hypocrite. Take your own advice,’” says Gary, 31, who works for the Municipal Employees Credit Union.
Her story is a firsthand account of the intoxicating world of payday advance loan lending and the hard journey out of it.
Payday loans are small cash advances on a borrower’s next paycheck. Their hefty fees translate into annual interest rates of several hundred percent, if not more.
Maryland essentially blocks payday lenders from setting up shop here by capping the interest rate that can be charged on loans. But the Internet opens the door to payday lenders from other states and countries that can easily sidestep any state’s consumer protection laws.
“[Online payday loan] lending makes it very, very easy because you do that in the privacy of your own home,” says Jean Ann Fox, director of consumer protection for the Consumer Federation of America. “Once you start, you get onto a debt treadmill.”
There are no firm figures on how much people borrow through payday lenders, although estimates range from $28 billion a year to nearly $48 billion.
Gary’s troubles began about two years ago with an e-mail from a personal cash loan lender offering fast cash. She was struggling to make ends meet on her $22,000 salary.