The first time I met 55-year-old Sandra King we sat in her Euclid apartment looking through her financial papers. She said she took out two payday loans when money got tight. But it wasn't until the second time I met her that I figured out she was lying. Or at least in some serious denial.
Sandra King: My name is Sandra King and I would like a printout of my statement of how much I owe.
In a Checksmart, King makes what appears to be a simple request for a copy of her loan statement.
Clerk: My corporate office is saying we can't print it out for you directly, but I can write it down for you? Okay?
Payday lenders say it isn't feasible for stores to print statements because the loans are short term - usually paid back in 2 weeks. But then there are borrowers like Sandra King.
MS: So is that it, are we done with lenders?
Sandra King: There's more... I might as well be truthful.
Here's what really happened: After King's heart surgery, she retired. Bills piled up. So King went to a payday lender and borrowed $100. That two-week loan costs $15 in Ohio. She left a postdated check for the whole amount to clear a few weeks later when her social security check came in.
Sandra King: When they sent the check to the bank that put me in a hole.
A hole King dug yet deeper. Worried she didn't have enough in the bank to cover the check, she went and got a loan to cover it from another payday lender.
Sandra King: It was like a revolving door for there for a while - you're robbing Peter to pay Paul and hoping to bypass Chico on the way.
In the end King still defaulted on loans. In Ohio, it's illegal for payday lenders to roll over late loans for an additional fee, so King's debt went to collection. King avoided the payday stores she owed money to and went to a new store. Jeffrey Dillman at the Housing Research and Advocacy Center says that's pretty common.
Jeffrey Dillman: They're in trouble and they get a two-week loan, in two weeks their financial situation isn't going to be that much better. They've got their paycheck, but already $500 or $800 of that paycheck is gone and it won't be long before they are out of money again. And by having such a short-term on the loan in addition to these exorbitant interest rates it really traps people into this cycle of debt.
What Dillman calls an 'exorbitant interest rate,' lenders call the cost of business. In Ohio, lenders can charge loans at an average annual percentage rate of about 400%. James Frauenberg at Buckeye Check Cashing says payday lending are popular because they're cheaper than other options with regular banks.
James Frauenberg: A bounced check for example, that's around 1400% APR. Credit card balance - if you were to borrow $100 off your card - that's around 900% APR.
Federal regulators are pushing banks to offer alternatives with guidelines on how to provide small short-term loans at a 36% annual percentage rate. For the past year, some Ohio credit unions have offered one month loans at an 18% APR plus an annual fee. The Ohio Credit Union League's John Kozlowski.
John Kozlowski: There's probably no money to be made in this, if at all, because you have a high risk plus it's a short term loan, so you're not going to generate a lot of income from that standpoint.
But the prospect of high risk, low return loans isn't inspiring many banks. Locally Key Bank says they are considering a short term loan product, but now do only check cashing. The lack of alternatives out there is no news to borrowers like Sandra King. When she's had financial troubles, she says payday lenders are the only solution.
Sandra King:You know you shouldn't do this but you have no choice.You figure I'll do what I can do the best I can and figure out this little jigsaw puzzle.
Since our first story aired, an anonymous donor paid off more than half of King's debt. King says she'll try and set up payment plans with the remaining lenders to pay off the rest. I'm Mhari Saito, 90.3.