Testimony for Public Hearing House Committee on Financial

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Testimony for Public Hearing
House Committee on Financial Institutions
March 13, 2014
Kelley L Johnson
1412 Teakwood St.
Salina, KS 67401
Greetings, my name is Kelley Lynne Johnson. I am the Administrative Assistant for the Kansas
Loan Pool Project (KLPP) at Catholic Charities in Salina. My job duties include helping the Director
with scheduling appointments, updating client files, mailing correspondence, remaining in contact
with current clients, and helping screen applicants from multiple communities here in Kansas. When
screening applicants, I must first ask them how many title loans and/or payday loans they have, and
the amount of their pay off for those loans. The KLPP cannot provide assistance if the client owes
more than $700 (previously $1,000). Most clients who apply for the Kansas Loan Pool Project have
more than one pay day or title loan, and the payoff amounts are well over $1,000. This is the main
reason we have to deny applications – not because they would be unable to repay the loan through
KLPP or complete other program requirements. If the client tells me they have multiple loans, and
the combined total is more than the program will help cover, I have to inform them they do not
qualify. This is the most heartbreaking part of my job.
On numerous occasions, I have had people cry to me on the phone, and some have even become
angry with me. One client said Speedy Cash was coming to take her car soon, and without her car,
she had no other way to pick up her medication. She said she was trying to work with a lawyer to
remedy her loans, but was informed by the attorney not much could be done legally to save her car.
KLPP was unable to help her because not only did she have the title loan, she also had a payday
loan for more than $700. The only income she receives is her monthly disability check, and had
taken out the loans to help pay for her medication while waiting for her first SSI check. Her monthly
check no longer covers her expenses while paying the interest on the loans. When I told her we
could not help her, she started crying and asked me what she was supposed to do – she was very
desperate. The irony is, she took out the loan to pay for medications, but can no longer get those
medications because the lender took possession of her car.
Another client called asking for help with his loans. He told me he had a title loan on his truck, two
payday loans in Salina, one in Concordia, and another from Topeka. The combined debt was well
over $2,000. He had been homeless off and on the previous year, and was trying to reestablish
himself in Salina, but was having a very difficult time due to all his money going to repay his loans.
He had received services from multiple agencies in Salina, but nothing would help him long term –
especially with the amount of predatory loan debt he had to pay. He could not get ahead until he
was free from these debts. I explained we could not help him since he owed more than the program
was allowed to help with, and he became angry. He asked if we could have helped him had he not
mentioned the number of loans he had, or if we could only help with the loans in either Salina or
Concordia. His desperation didn’t end there – he called several times that week trying to “pull a fast
one” over on me. However, I noticed the same number and the same voice on the phone, so I had
to tell him I already denied him as a client. He again became very angry with me.
A couple from Hays called on a Monday afternoon, but by the time I returned their call Tuesday
morning they informed me their truck had already been taken and to disregard their message. I let
them know that we wouldn’t have been unable to help as they owed too much. Plus, the application
approval process takes a few days, so we wouldn’t have been able to save their truck anyway. I
also informed them that even though the lender had already taken possession of their vehicle, it
didn’t necessarily mean their debt was paid. If the lender sells the vehicle for less than the debt
owed, the borrower is responsible for paying back the difference. The couple had no idea, but was
appreciative of the information. They seemed rather understanding to the fact KLPP could not help
them, and asked for other resources that might help. I referred them to an agency in Hays
These are only a few examples of the encounters I have had denying clients for the KLPP. One
thing I can offer them, however, is empathy – I have also been stuck in the predatory lending trap,
and on multiple occasions. The first was when I was pregnant with my second child and my hours
at work had been reduced. My husband had just started a new job and the rent was due. Next door
to my place of employment was a Check n’ Go payday loan vender. I borrowed $500 and at the
time, the repayment of $575 didn’t seem to be too bad, as my husband would have received his first
paycheck by the due date of the loan. However, when it came time to repay the $575, it made such
a huge dent in our bank account that I returned the next day to borrow another $500. This cycle
continued for six months until I was able to repay it with my tax refund.
The next time was after our third child was born. My family had gone on a four-day camping trip,
only to return home and see a bright orange disconnection from the gas company on our front door.
I had signed up for a pay agreement with Kansas Gas Service, however I missed a payment which
was due while we were away, so our service was disconnected. Our landlord was coming the next
day for our annual inspection, and our lease specified we maintain all utilities at all time. Fearing
possible eviction, I went to Speedy Cash to borrow $560 to cover the $545 dollar gas bill. Since the
time I borrowed the money, I had paid roughly $3,000. Only 10% of my biweekly payments were
applied to the principle balance. Speedy Cash has wonderful customer service – the employees are
very friendly and they provide frequent “courtesy calls” to let you know your available credit. After
slowly repaying back the loan for a year, I received a call saying I had $300 available. We
desperately needed the money, so I drove down later that day to borrow it.
Last August, I noticed payments to Speedy Cash had stopped coming out of our bank account. I
had been making payments for so long; I thought I had finally paid it off completely. Fast forward to
just after this last Christmas. I went to buy groceries and had my debit card declined. I quickly
looked at the bank balance on my phone and saw a pending debit to Speedy Cash for $580. I left
the store empty handed and called Speedy Cash. I was told my account had been flagged during
one of their audits because I had not made a payment since August. I then asked how much credit I
had available. Surely, with a huge payment like that, I should have a couple hundred to borrow. The
lady on the phone told me I had only $9 available – the pending payment was just to cover the
interest from August to December. My family of six had just moved into a small trailer house, as we
could no longer pay for our much nicer, much larger house. Between the biweekly payments to
Speedy Cash, and the overdraft fees from the bank caused by those payments, we were broke.
My husband also has a line of credit with Speedy Cash – he borrowed $1,000 to buy Christmas
gifts and pay bills one year since I had lost my job. We were able to pay off his loan a few months
later with our tax refund, but after what happened this December, he returned and borrowed it
again. Occasionally, he will call and say he is stopping by “the place where you sell your soul” to get
what little he can borrow. At this point, to pay off both of our loans, it would cost around $2,000 –
and we have probably paid more than that already just in interest and bank fees.
These lenders put on the façade they are here to help you out in pinch. Yes, they can give you cash
if your car needs repairs, or if you need extra cash to pay bills – but they don’t tell you how
incredibly difficult it is to get out of their trap, how damaging it can be to your finances. When you
are desperate to provide for your family, you don’t pay attention to things like 491% interest from
Advance America or 384% interest from Speedy Cash. Your main focus is on how you are going to
make it to tomorrow. Many of our clients, just like me, have been repaying the same loan for years.
Pay day loan venders also target those that have no credit or bad credit – which is typically the
working poor. Their establishments are purposely located near places like Dollar General, Family
Dollar, pawn shops, and other places frequented by people trying to make their pennies stretch.
Current regulations are not working. More and more people walk through the door of a place like
Speedy Cash, or Check n’ Go, or Advance America for the first time, not realizing how many times
they will be returning. These buildings are flashy, and convenient. For those that lack a good
support system to help in times of need, they turn to these places feeling it is their only alternative.
The problem is the outrageous interest on these loans makes it very difficult to repay them,
therefore creating a cycle of borrowing and repaying. Because this cycle takes so long and is so
difficult to break, it then creates the need for multiple loans from multiple vendors. The current
regulations say only one loan is allowed per person, however, the lack of enforcement and
loopholes (e.g. calling loans a “line of credit” instead) only perpetuate this devastating problem that
is entrenched in our communities. It is my sincere hope for you to reexamine the current regulations
and modify them in such a way to stunt the growth of this type of lending.
Thank you kindly for your time,
Kelley L. Johnson
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