Lenders that make payday, auto title, and installment loans file suits against customers for non-payment tens of thousands of times annually. In Missouri alone, these lenders file more than 9,000 suits a year, according to an analysis by ProPublica.
The court system is often biased on the lenders' side, making litigation profitable for them and increasing the costs for borrowers. These loans come with annual interest rates that range from about 30 percent to 400 percent or more. In some states, after a suit results in a judgment, the debt can continue to add up at a high interest rate. Missouri has no limits on these rates. In many states, lenders are allowed to charge borrowers for the cost of suing them, which adds legal fees to the preexisting principal and interest.
Few borrowers are represented by an attorney, and those who fail to appear in court may risk arrest. Many borrowers often do not know how much they have paid off or how much they still owe; court orders to garnish wages are sent to debtors’ employers, not to debtors themselves.
One consumer, Naya Burks of St. Louis, borrowed $1,000 from AmeriCash Loans and had to pay back $1,737 over six months. When Burks defaulted, AmeriCash sued her in 2008, and she found her debt had grown to more than $4,000. AmeriCash took more than $5,300 from Burks’ paychecks, usually in increments of $25 per week that made it more difficult for her to cover basic living expenses. Under Missouri law, her debt was allowed to grow at the original interest rate of 240 percent, until the $1,000 loan reached a $40,000 debt. ProPublica submitted questions to AmeriCash about the case, but the company filed a court declaration, without explanation, that Burks had completely repaid the debt.