Loan Amounts May Snowball When Payday Lenders Sue Borrowers Local company
That year, the $ 1,000 loan Burks took out in 2008 had become a debt of $ 40,000, almost all of which was interest. However, after ProPublica submitted questions to AmeriCash about Burks’ case, the company quietly and without explanation filed a statement in court that Burks had fully paid off its debt.
If they hadn’t, Burks would have been faced with a tough choice: file for bankruptcy or make payments for the rest of his life.
Judge Christopher McGraugh, who was appointed to the Missouri Associate Circuit Court in St. Louis last year by Governor Jay Nixon, came to the bench with 25 years of experience as a civil lawyer and criminal. But, he said, “I was shocked” by the debt collection world.
As in Burks’ case, expensive Missouri lenders regularly ask courts for judgments that allow loans to continue to grow at the original interest rate. Initially, he refused, McGraugh said, because he feared it would doom debtors years, if not a lifetime, in debt.
“It’s really a contract bondage,” he said. “I just don’t see how these people can come out from below [these debts]. “
But he was heard by lawyers for creditors, he said, who argued that Missouri law is clear: the lender has an unambiguous right to get a post-judgment interest rate equal to that of the initial contract. He studied the law himself and agreed. His hands were tied.