Within a mile of Flamingo Road between Swenson Street and Koval Lane, there are four payday lenders. Rising up like Starbucks or McDonald’s, there are many intersections around the Las Vegas Valley where people can take out quick, short-term loans.
Moneytree, Dollar Loan Center, Rapid Cash, Check City, Star Loan Centers – there are many options to choose from.
“There are more payday loans in Nevada than there are McDonald’s,” said AJ Buhay, field director for the Progressive Leadership Alliance of Nevada (PLAN), 2330 Paseo Del Prado. “All you really need is a pay stub, photo ID, and a few references. With this, people can have hundreds of dollars in about 20 minutes. “
The process for payday loans is simple: A lender allows people to borrow a small amount of money to be repaid with interest in a lump sum by the next pay period. Some lenders allow people to make installment payments.
However, many activists who defend the regulation of the payday lender industry see the dark side of loans, saying they tend to be predatory.
Most people using payday loans earn less than 30K
Although a variety of people can take out a loan, most payday borrowers earn less than $ 30,000 a year, according to PLAN.
“The people who usually get these loans are in a situation where they cannot take out a credit card or apply for any other type of loan,” Buhay said.
According to the Consumer Financial Protection Bureau, each loan has finance charges ranging from $ 10 to $ 30 for every $ 100 borrowed. A standard payday loan is about 400% interest, while the annual percentage rate on a credit card is around 12-30%.
According to PLAN, the average payday loan in Nevada is $ 350, and Nevada residents pay about $ 77 million per year in fees alone.
Besides the fees and high interest rates, most payday loans come with other problems as well, according to Buhay, who added, “They come with conditions … (like) accessing your bank account. “.
Despite the high risks, people who take out payday loans often do so due to emergencies.
“A lot of borrowers don’t have financial knowledge,” Buhay said.
Las Vegas resident Harold Carnes, 59, had no idea how bad payday lenders could be when he swallowed his pride and walked into Rapid Cash to get a loan to pay his rent.
Carnes has worked in fast food for almost 20 years. Although he went to university in the 90s to study prison administration, the job market did not go as he had hoped.
In 2014, he and his wife moved to Las Vegas. Carnes was certain he could secure a managerial position at Wendy’s, a company he had worked for previously. On the day of the interview, he had to ride a bike in 100+ degree heat to get to the store.
“I decided not to wear a suit because it was very hot,” he said.
He was refused an interview.
Instead, he landed an entry-level job at McDonald’s starting at $ 8.25 an hour (he was making $ 9 when he left). Even working 100-hour pay cycles, he said it was difficult to manage minimum wage bills. Earning around $ 700 or $ 800 from an after-tax paycheck, Carnes said the money would quickly be absorbed into his weekly rent of $ 269, leaving the rest for his remaining bills and food.
After starting volunteering for Fight for $ 15, a nationwide campaign to raise the minimum wage, Carnes noticed his working hours were reduced. Soon he said he barely had enough to pay the rent.
And it’s not only him that he has to think about: Carnes and his wife have custody of his 8-month-old grandson.
With his back to the wall, Carnes decided to take out a loan from Rapid Cash.
“It’s embarrassing to have to explain to them what you’re going through,” he said.
With $ 500 in hand, he paid his rent and hoped to quickly pay off the loan, which also included $ 143 in interest.
Some borrowers find themselves on a “debt conveyor belt”
Sophia Medina and Tenille Pereira, staff attorneys at the Legal Aid Center of Southern Nevada, 725 E. Charleston Blvd., said most of their clients who have taken out payday loans have more than one.
“For most of our clients, payday loans are like crisps,” Medina said. “They can’t have one.”
When people lose their chance and have to take out a loan, they might not be able to repay it in the allotted time. They then take out another loan to cover the interest on the first loan, entering a brutal cycle.
“This creates a debt conveyor belt,” Pereira said.
Buhay added that it is a toxic environment for borrowers.
“You are trying to catch up, but the only way to catch up is to find another job where you make more money,” he said.
Carnes knows this cycle all too well. He thought he would be able to repay his first loan thanks to the repayment plan, but after his working hours were again reduced in addition to being on sick leave, he was not able to to pay. At first, he suffered harassing phone calls in an attempt to recover the money. Then the lender suggested going to another optional payday loan center.
Once again, Carnes took out another payday loan, this time with Moneytree. But with most of his hours cut back, he couldn’t repay either of the loans and defaulted on both.
Before defaulting on a payday loan, borrowers have the option of renewing the loan by paying the interest rate, but only for about 90 days. After that, they have to produce the money or risk defaulting.
Defaulted loans usually end up in small claims court
Once they default and are sued, borrowers can have their wages garnished.
“A lot of payday loans go to small claims court,” Medina said. “What we’re doing is looking at the contract and trying to see if all the laws and regulations have been followed.”
According to the Legal Aid Center’s 2015 annual report, 33% of its cases relate to consumer rights.
Medina said that in the past 12 months, the nonprofit has taken on 75 payday and title loan cases.
“If we have the resources and the case has merit, we will take the case,” she added.
Pereira said that before accepting clients, he assesses the person’s financial needs and whether he has a case. Many cases are accepted pro bono.
Most customers are unaware that payday lenders are supposed to offer a repayment plan before they take legal action. Even though some payday loan debts cannot be sued due to loan agreements, Pereira said he has seen cases where the payday lender sells the debt to a collection agency, which can sue for the money.
The Consumer Financial Protection Bureau is trying to come up with rules to regulate the industry, including giving borrowers more repayment options and having a better screening process to make sure they’re ready to repay the loan.
While regulations are being discussed nationally, Buhay hopes local lawmakers will take action to rule payday lending practices in Nevada.
The Payday Lender Best Practice Act under Revised Nevada Laws is Nevada’s attempt to offer some accountability by putting regulations on loan extensions and the steps lenders must take before collecting a debt. .
However, many advocates believe that is not enough.
Buhay said one of the problems is Nevada does not cap the interest rate on payday loans, which have reportedly hit 521%. Some states have banned payday lenders altogether, while others have capped the interest rate.
Buhay said another problem is that payday loans siphon money from poor and minority communities.
Some businesses, such as marijuana dispensaries, have a set number of business licenses that can be issued. This is not the case with payday lenders.
In the meantime, people still have to contend with the lack of regulation.
For now, Carnes has not been sued for his outstanding loans, which total nearly $ 2,000 with interest.
Although he now works at Five Guys Burgers and Fries – a job he says he enjoys – he still only makes $ 8.50 an hour. With more consistency in his schedule, he said he and his wife could finally afford an apartment.
However, his payday loans are in default and his paycheck does not allow him to repay.
PLAN is also trying to get more people to share their payday loan stories.
“People are often too embarrassed,” said Buhay. “They think it’s their fault when they default on their loans and don’t realize the system is stacked against them in the first place.”
For more information on PLAN, visit planevada.org.
For more information about the Southern Nevada Legal Aid Center, visit lakesn.org or call 702-386-1070.
Editor’s Note: This is the first article in a series on the Las Vegas payday loan industry. If you have had any experience with payday loans, please contact Anne King, Associate Editor of View, at [email protected]