Caught in the loan trap

"I was in a vulnerable position in my life and I was taken advantage of," she says. "That wouldn't happen now. But I think they know that when people go there, they're desperate, that they don't have any other avenue."

The Toronto Star
June 19, 2004

Caught in the loan trap
Borrowing a quick $500 is the easy part. Paying it back can become a vicious circle.
Jim Rankin and Nicole MacIntyre

Proposed class-action lawsuits have been filed from coast to coast alleging payday lenders are charging what amounts to criminal interest rates on their short-term loans. Here are the stories of four people who borrowed from payday lenders and, to varying degrees, fell deeper into financial trouble. All are either the representative plaintiff, or involved in, the legal proceedings in Ontario. The companies being sued say they have done nothing wrong and intend to defend themselves.

Ken Mortillaro, city worker
Kenneth Mortillaro still smelled of the sewer when his boss delivered the message from the payday lenders.

"They said you're a deadbeat," Mortillaro recalls his boss saying in front of his co-workers. "Everybody in my work heard this. I was really humiliated."

Mortillaro, a labourer with Toronto's water and waste-water management department, knew that debt collectors from Cash Money, a national payday loan chain, were after him for an overdue $700 loan. After receiving several phone calls at home, Mortillaro had told them his situation and explained he could make small payments. But that wasn't good enough.

Cash Money called his workplace. "My supervisor comes running out of the office saying … ‘They want their money today. If you don’t go there today they're going to garnishee your cheque and they're going to sue you.'"

Mortillaro's embarrassment deepened as his supervisor told him to take care of the debt right away, warning, "this doesn't look good for you."

Stunned, Mortillaro apologized and promised it wouldn't happen again. When he got home, he found four more messages from Cash Money.

"They drove me crazy," he says.

A former truck driver, Mortillaro started having money problems when he lost his driver's licence due to a regulatory suspension. Mounting legal bills, combined with spotty employment and an ill dog, left Mortillaro in need of help.

"I didn't have an Uncle Angus I could go to," Mortillaro says, mocking a television ad by Money Mart, another payday lender, that suggests it's easier to borrow from them than family.

"I did talk to them (friends and family), but I mean, there's a limit. They're not rich, either."

In March, 2002, on the advice of co-workers, he started borrowing from several payday lenders. Almost right away, one gave him 30 per cent of his paycheque. The money helped for the week, but when payday came, the interest and fees added up. In a little more than a year, he took out at least 13 loans, worth more than $5,700, from Money Mart alone. He had trouble paying those off and borrowed more money from both Unicash and Cash Money over that period.

"Once you start digging that hole, there's no way to crawl yourself out of it," Mortillaro says. "You're already in over your head. So it has a snowballing effect." When the calls from the debt collectors became too much, Mortillaro did some research of his own. After discovering the maximum legal interest rate was 60 per cent per annum, he contacted lawyer Marty Doane for help. The calls for money have stopped since Mortillaro started class-action lawsuits against Cash Money and Unicash.

Peggy Davis, retired city director
Peggy Davis can describe in minute detail the front page that almost ruined her.

It was Feb. 16, 2002. She shared the newsprint with Canadian skating pair Jamie Salé and David Pelletier. They had just been handed a gold medal after a scandal of international proportion at the Salt Lake City Olympic Games. She had just been ousted as a top city official with a gambling addiction.

"Windsor social services audited; Senior director seeks treatment" read the headline in the Windsor Star. Davis, a director in the city's social services department, was reported to be in a rehab program and under investigation for possible financial improprieties.

What the paper didn't know is that Davis wasn't stealing from work to feed her addiction. She was turning to payday lenders, and was in over her head with them as well.

"They brought in auditors where I worked because I guess they figure if you gamble, then you steal," Davis says.

After a year, the auditors found no money missing. But the damage was done.

"It was awful, it was terrible for my family," says Davis, 59, who is now retired.

"But two years ago, even a year ago, I couldn't sit here and talk to you about this."

Her addiction started after a visit to the casino with friends. Depressed because of her mother's death, Davis found escape in the mindless slot machines. The game soon consumed her savings and maxed out her credit. With nowhere else to turn for money, Davis found herself at the only place she could think of where she could get a quick cash infusion to fuel her habit.

An initial loan at Stop ‘N’ Cash led to multiple loans, many coming in the same week. She says she became such a good customer she was soon allowed to borrow nearly her entire paycheque. Forking over as much as $300 in fees and interest every time, Davis soon owed up to $1,400 on her next payday.

Davis feared her secret debt would be made public if she didn't keep up with payments. She says she overheard employees on the phone to other customers and didn't doubt they'd call her workplace to tell her boss about her outstanding loans, should she miss payments.

Though on a first-name basis with Stop ‘N’ Cash employees, Davis was careful to slink in and out of the business, hoping no one would see.

"I would park way in the back, and in between the buildings. I would take this little rocky pathway. I would climb over a wall that was a couple of feet and then I'd go in. I'd never park in front."

Even when she finally sought help for her gambling addiction, Davis still made weekly trips to the payday lender.

"At that point, I was busy paying off whatever I could. Everything that I had coming in was going to pay bills that I hadn't paid. And I wasn't gambling anymore, I was just trying to get out of this huge financial debt that I was in," explains Davis.

Davis turned to Windsor lawyer Harvey Strosberg when she got her debt down to $650, and the collectors were still after her. Now the main signatory in a class action against Stop ‘N’ Cash, she hasn't heard from the payday lenders in months. They stopped asking for money after her lawyer called them and requested loan documents. With help, Davis has also overcome her gambling addiction.

"I was in a vulnerable position in my life and I was taken advantage of," she says. "That wouldn't happen now. But I think they know that when people go there, they're desperate, that they don't have any other avenue."

Norm Innocenti,
High school teacher
Norm Innocenti knew better.

A law teacher with a copy of the Criminal Code in his classroom, Innocenti has read all about Section 347 and the criminal interest rate.

Yet the 52-year-old Windsor man still found himself in line at Money Mart, taking out $500 until his next payday, never once questioning the interest rate and fees tacked onto his loans.

"I don't want to go to the bank. The reason people go to Money Mart (is) it's convenient. You go there, you qualify, you get your money. And people don't want to go to the bank because you've got to pull teeth."

It was normally an emergency, such as a broken-down car or child's tuition payment, that drove him to the payday lender, says Innocenti.

"I'm not poor, but I'm a teacher and I have four kids and three of them are in university, so there were times in the past three years when I was really tight."

Innocenti finally realized how expensive his quick fix was when lawyer Harvey Strosberg came to talk to his law class about the impending class-action lawsuits against several payday lenders, including Money Mart.

Innocenti estimates he's paid out $1,000 in interest and fees to Money Mart, and says his situation shows it's not just lower-income earners who are affected by payday lenders.

"This thing goes after middle-class people who are not technically poor, but who get into situations … It basically preys on people that are tight."

Still, he admits he's been back for more loans since he joined the lawsuit. When the bills mount, it's sometimes safer to borrow until payday than risk paying a $30 NSF fee at the bank, Innocenti explains. He just wishes the cost of a quick fix could be a little more reasonable.

"People would still use them. They won't make as much money, but how much money do these guys want to make?"

Ron Oriet, engineer
Ron Oriet doesn't like to talk about money. He's embarrassed and doesn't want his picture in the paper.

Long pauses and nervous gestures follow any questions about the 31-year-old's finances. He'll answer eventually, but would prefer to keep the details of how he ended up at a payday lender to himself.

"I just found myself in that pinch," says Oriet, who works as a project manager at an engineering firm in Windsor.

He put himself through school, and he's got hefty student loans. How much debt, he'd rather not say.

But the payments are enough that, when combined with car payments, insurance, rent and other bills, he's been short.

Oriet first walked into Money Mart in the fall of 2000. He'd driven by the payday lender many times and always wondered how they worked. Two weeks after hearing their offer, he was back to take out a loan. More loans followed, often twice a month. The amounts were rarely more than $100, but the interest and fees added up.

"I just accepted it and started a vicious cycle," Oriet says. "I've never really been good at calculating interest. I took courses in high school in accounting and failed miserably every time."

At the time, the payday loans just seemed more convenient. The bank, with its demands for perfect credit and long-term job stability, just wasn't an option in Oriet's mind.

"It's too frustrating dealing with the banks," he explains. "They don't give short-term loans anyway."

Oriet's monthly trips to Money Mart stopped abruptly when he read in the media about the class action started by Windsor lawyer Harvey Strosberg. Returning one last time to Money Mart, he asked for a record of all his transactions. The amount he had turned over just in interest payments sickened him.

"I have not been back since. Have I found myself in a pinch since? Absolutely, everybody does every day. But I refuse now to go back to someplace like Money Mart. I'd rather just find some other way."

Oriet goes silent for several seconds when asked what that other way is. Finally, he says, "You could swallow your pride and hit up family or friends."

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