What payday loans mean to the borrower
Editor’s Note: This is an edited excerpt from the upcoming installment of The Long, Hard Road, a special Enquirer project that returns Thursday on Cincinnati.com.
Nick DiNardo examines the pile of files next to his desk and pulls out that of the single mother he met this spring.
He remembers walking into his Legal Aid Society office in downtown Cincinnati with a grocery bag full of papers and a story he had heard at least a hundred times.
DiNardo opens the file and shakes his head, looking at the numbers.
“I hate these guys,” he says.
The guys he talks about are payday lenders, although DiNardo often calls them “scammers.” These are the guys setting up shop in malls and old convenience stores with neon signs promising FAST CASH and EZ MONEY.
A new Ohio law is supposed to stop the most abusive of payday lenders, but DiNardo has been fighting them for years. He’s seen them adapt and attack rifts before.
He also knows that the people they are targeting, such as the single mother whose case he now holds in hand, are among the most vulnerable in the city.
Most of the payday loan clients are poor and earn around $ 30,000 per year. Most pay exorbitant fees and interest rates of up to 590%. And most don’t read the fine print, which can be ruthless.
DiNardo flips through the pages of the single mother’s file. He had spent hours putting away the receipts and documents she had taken to her office the first day in the grocery bag.
He found the problems started when she approached a payday lender in April 2018 for an $ 800 loan. She was working but needed the money to cover unexpected expenses.
The lender gave him a contract and a pen.
At first glance, the case didn’t sound so bad. For $ 800, she would make monthly payments of $ 222 for four months. She used her car, which she owned free of charge, as collateral.
But there was a catch: At the end of those four months, she found out she owed a lump sum payment of $ 1,037 in fees. She told the lender that she couldn’t pay.
He told her not to worry. Then he gave him another contract.
This time, she received a new loan to cover the costs of the first loan. After paying $ 230 for 11 months, she thought she was done. But she wasn’t. The lender said she owed another lump sum of $ 1,045 in costs.
The lender gave him another contract. She paid $ 230 a month for another two months before it all fell apart. She was going to go bankrupt. She couldn’t afford rent and utilities. She couldn’t buy her children’s clothes for school. But she was afraid to stop paying the loan because they risked seizing her car, which she needed for work.
By that time, she had paid $ 3,878 for that initial loan of $ 800.
DiNardo called the lender and said he would sue if they kept taking money from him. After some haggling, they agreed to settle for what she had already paid.
DiNardo puts the single mother’s file back into the pile next to his desk. She was able to keep her car, he says, but she lost about $ 3,000 that she couldn’t afford to lose. She barely made it. The loan almost wiped her out.
DiNardo is hoping Ohio’s new lending law will mean fewer cases like his in the future, but he’s not sure. As mortgage rates rise to 3.5% and auto loans hover around 5%, the poor without access to credit will still turn to payday lenders for help.
And when they do, even under the new law, they will pay interest rates and fees of up to 60%.
In DiNardo’s world, this is progress.