Victim of payday lending debt trap speaks out

Sherry Shannon needed a little extra money to get her car fixed. On Social Security disability, Shannon needed every dollar to pay her rent, utilities, and phone bills — leaving room for little else each month.

When someone suggested she take out a small payday loan to finance her car repairs, she thought, “Why not?” After all, the loan was just to fill a temporary gap of about $140. But at a 260 percent annual percentage rate, paying it off was to become a challenge.

That was in 2012. After about 12 more “small” loans, and even moving into a one-bedroom apartment to help save on monthly expenses, she continues to struggle to find a way out of a vicious debt cycle.

Q. You took out your first payday loan to pay for car repairs, but since then you’ve taken out several more. Why?

A. Once I got moved in, I thought, “I’m ready to pay this off!” Since I receive Social Security disability, I was told to come back on the third of the month to pay my loan.

When I paid it off, I realized that I didn’t have enough money for my month. There is no way I’m going to be able to do this. So I paid the amount and took out a new loan on the same day to cover my expenses.

That’s how come I’ve been with this company for so long. Every month when I receive my Social Security check, I pay off my loan and take out a new one. And I don’t see how I’m going to get out of this cycle. Today, I owe $264, and the APR of my current loan is 171 percent. In the last year, I’ve paid nearly $500 in fees, but I still owe them $264.50.

Q. While the loan fulfilled a financial need in the beginning, you said you started observing things about your payday loan lending store that made you change your opinion about payday loans. Could you explain?

A. I looked at it differently because, when I first went there, I was more focused on how I was going to solve my problem, how they could help me.

But I started noticing the long line around the first of the month [the time people receive Social Security disability payments]. They set up for the people who have been coming there the longest, and they have a special lane for you. You can just walk in like a “VIP” type thing.

They put an ATM in there, so people can get their direct deposit. You have to get your money out, but that is a big rip off because you can only get $200 at one time, and the loan is more than $200. And each time you take money out, I think they charge you about $3 or $4.

I also noticed that there were people saying, like I was, “Can I pay a little bit of this because I still got to pay my rent,” or “Can we work something else out?”

That’s when I started saying that I want to get out of this. I want to pay this off and be through with it. But when I attempt to do it, I find myself stuck.

Q. How can communities, churches and other organizations help certain groups of people who are especially vulnerable to the payday loan lending trap?

A. One way is by talking about it — like me doing this. A lot of people are not even aware of it. They are thinking about the money, and that’s what I was thinking about. I have experience in it, so now I have started talking to people. When I hear people say [that they are going to get a payday loan], I say, “No, don’t go there. That’s not going to be good for you.”

Zittlow is communications director for the Minnesota Catholic Conference.