Loan Amounts Can Snowball When Payday Lenders Sue Borrowers

More than 9,000 suits are filed annually by payday loan companies against customers in Missouri. | Photo courtesy of Creative Commons
More than 9,000 suits are filed annually by payday loan companies against customers in Missouri. | Photo courtesy of Creative Commons

Companies that make high-interest payday, auto-title and installment loans are filing more than 9,000 lawsuits annually against their customers in Missouri, according to a ProPublica analysis. A nationwide examination shows that the court system is often tipped in lenders’ favor, making lawsuits profitable for them while often dramatically increasing the cost of loans for borrowers.

High-cost loans already come with annual interest rates ranging from about 30 percent to 400 percent or more. In some states, after a suit results in a judgment — the typical outcome — the debt can continue to accrue at a high interest rate.

In Missouri, there are no limits at all on such rates. After a judgment, lenders can garnish borrowers’ wages or bank accounts in most states. In Missouri and other states, debtors who don’t appear in court also risk arrest. The St. Louis Post-Dispatch reported in 2012 that some Missourians had landed in jail after missing a hearing.

The growth of high-cost lending has sparked battles across the country, including Missouri. In response to efforts to limit interest rates or otherwise prevent a cycle of debt, lenders have fought back with campaigns of their own and by transforming their products.

Read more from the St. Louis Post-Dispatch


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