The average American family will spend $900 this holiday season. If you are among the lucky 22 percent of Americans who will get a bonus this season – that’s probably what you’ll use. The majority of us in situations like these that require extra cash look for alternatives.
Perhaps you’ve seen commercials like this one:
A camera zooms in and out shooting some pretty nice trucks and cars. Vehicle owners point to bumper stickers that reflect their personalities. The images in the commercial may vary but the message is the same: if you own your car, borrow money from us. Just let us keep your car title as security.
Kyra Speights got an iffy feeling when she borrowed $2,800 in 2012 from a payday lending company. She says it was an emergency.
Speights is a middle class woman in her 40s. She has a state job with great benefits, but she has no savings. When her only daughter told her she was in a tight spot, Speights sprung into action.
“She could’ve come stay with me if she was in Texas,” Speghts says. “She’s in college in Kentucky, her living situation was in jeopardy. So me, as her mother, I did what I had to do for my kid.”
Three years later, Speights is still making payments.
“They gave me $2,800 and I think I’ve paid these people almost $5,000,” she says. “I’m not even through paying on the loan.”
She recently called to find out what her balance is. “[The clerk] says, well, just give us $1,100. They still have the title to my car, so, technically they own my car.”
In a way, Speights’ car is her livelihood. If she were to pay off her loan today she would have paid 200 percent interest on the original loan.
Stacy Ehrlich says she’s seen worse. “We’ve seen them as high as 672 percent.”
Ehrlich is with St. Vincent de Paul, a Catholic ministry which, in the last year or so, started paying off the debts of people like Kyra Speights.
“We basically work with a Credit Union,” Ehrlich says. “We collateralize and co-guarantee the loans and convert high interest loans into low interest credit union loans.”
Right now, the credit union guarantees St. Vincent de Paul an interest rate of 2.2 percent.
“It’s really incredible. One of the most exiting parts is when you call someone and you say ‘Guess what? You made your last payment and you’re done.’ And [there are] lots of hugs and big woo-hoos.”
In the few months since Ehrlich has been doing this, she’s bought 70 loans. Only two have defaulted.
She sees it as a ministry. She says dioceses across the state from El Paso to Houston are putting the finishing touches on their high to low interest conversion programs.
Martha Hernandez meets me at the lobby of the Austin City Hall. She’s a monitor with the city. Hernandez tells me of some failed attempts to outlaw the $3 billion industry that payday lenders represent in Texas. But cities like Austin are taking the lead.
“I believe there are about 27 or 28 cities across the state of Texas that have adopted ordinances that deal with the business side,” Hernandez says. “There’s also ordinances that deal with where these businesses can be located.”
For instance, in Austin, there’s a limit as to how many times a loan can be renewed. Borrowers must be vetted and deemed able to pay. If businesses don’t comply, Hernandez takes them to court.
Kyra Speights never knew there were options out there.
“I didn’t have a clue,” she says. “If I knew in 2012, I wouldn’t be standing here.”
Speights is standing, but barely. I hadn’t noticed before, but she hunches herself to walk and limps a bit. She has a back injury and her right knee pops out of place.
“I can hear it and I can feel it – crack, thump, crack, thump – every step I take,” she says.
Despite the difficulty, Speights is taking determined steps toward being debt free. She plans to apply for a loan through St. Vincent de Paul and hopes to qualify before her lender takes possession of her car – a crisis she says she could not survive.
Update: After hearing this story, a listener has arranged to pay off the rest of Speights’ loan.