Aziza Gary grew increasingly uncomfortable.
Here she was, a lending specialist for a credit union in Baltimore, advising a member to steer clear of payday loans. Gary knew these loans were a bad deal from her years in banking. She even briefly worked for a company offering payday loans and had seen consumers unable to escape the cycle of these high-cost, revolving loans.
But the more the credit union member gushed with gratitude for Gary's sage advice, the more Gary squirmed.
The truth was Gary had three outstanding payday loans. A big chunk of each paycheck went to finance these loans. She was behind on her rent and utilities. And the single parent barely was able to put food on the table for herself and her young daughter.
"In the back of my head I'm saying, 'You're such a hypocrite. Take your own advice,'" says Gary, 31, who works for the Municipal Employees Credit Union.
Her story is a firsthand account of the intoxicating world of payday lending and the hard journey out of it.
Payday loans are small cash advances on a borrower's next paycheck. Their hefty fees translate into annual interest rates of several hundred percent, if not more.
Maryland essentially blocks payday lenders from setting up shop here by capping the interest rate that can be charged on loans. But the Internet opens the door to payday lenders from other states and countries that can easily sidestep any state's consumer protection laws.
"Internet lending makes it very, very easy because you do that in the privacy of your own home," says Jean Ann Fox, director of consumer protection for the Consumer Federation of America. "Once you start, you get onto a debt treadmill."
"People don't tend to complain because they think it's their own fault," Fox added.
There are no firm figures on how much people borrow through payday lenders, although estimates range from $28 billion a year to nearly $48 billion.
Gary's troubles began about two years ago with an e-mail from a payday lender offering fast cash. She was struggling to make ends meet on her $22,000 salary.
The payday lender's e-mail arrived just when Gary needed money for school supplies for her daughter, who was then 11. All Gary had to do was fill out the online application. No faxing, no credit check. She borrowed $200 and gave the online lender access to her bank account.
"In 24 hours, the money was in my account," she says. "I thought that was the best thing next to peach cobbler at that point."
On payday, she had the option of repaying the $200 along with a $60 fee, or just paying the fee and rolling the loan over until the next paycheck two weeks later. She rolled over the loan. And each time she rolled the loan over after that, she paid another $60.
"I knew the business," she says. "I knew what could happen."
But she figured she could handle it.
Within a month of her first loan, Gary took out two others from different payday lenders that had e-mailed her. One loan was for $300 and carried a $90 fee; the other was a $400 loan with a $125 fee.
She says she doesn't remember why she took out the second loan.
"Honestly, greed," she says. "Just because I didn't have money at that time and I wanted something. And it was easy."
She took the third loan out to help meet the rent.
Every payday, she rolled over the first two loans. The third she would pay off but turn around and take out again. After three months, the first two lenders began withdrawing principal payments on top of fees from her bank account.
At that point, payday lenders were taking $375 from each paycheck. And after insurance and car loan payments were automatically deducted from her account, Gary was left with less than $100.
Her finances deteriorated rapidly. "I'm trying to stay in good standing with the payday-loan company so they don't come to my job and ruin my whole career," Gary says. "But my bills aren't being paid."
She says she fell two months behind in rent. For four months she made only partial payments on her electric bill. When the refrigerator was empty, she and her daughter visited Gary's sister for meals or to borrow food.
She didn't tell her family or colleagues what she was going through, worried they would think less of her.
"I panicked," she says. "I cried. I prayed. It was a crazy situation for me."
Then came the call at work from the cash-strapped credit union member whom Gary talked out of payday loans.
"As soon as I hung up the phone, ... I said, 'OK, this has to end.' That's when I actually pulled my contracts and read what I signed," she says. "It's right there for you to see -- when you want to look for it."
What she saw scared her. The fees on one loan worked out to an annual percentage rate of 524 percent. The rate on another loan exceeded 700 percent. Maryland caps annual interest at 33 percent.
Gary says, "I walked into my supervisor's office, closed the door, cried for about 15 minutes and said, 'This is my problem.'"
Sherry Bender was Gary's supervisor at the time.
"When you see someone professionally coming in here every day, you don't know that people are having these problems," Bender says. "It's just heartbreaking. She came in here telling me that they didn't have hot water."
Bender says she had been a single parent, so she understood the difficulty of making ends meet on one income. At the same time, she says, "We hold [employees] to a higher standard." Bender was firm.
"She gave me the hard truth," Gary says. " 'You know what this was about. You put yourself in this situation. ... Whatever we can do as your credit union, we are going to do. But you're going to have to show us that you want to get out of this situation.' "
Gary committed to paying off the $200 payday loan on her own. She took out a $1,700 personal loan from the credit union at a rate of 12.99 percent to pay off the other loans. She expects to pay off the personal loan by year's end.
Gary, now a business development representative for MECU, says she's sharing her story because she wants others to avoid her mistakes and to know the cycle can be broken.
Those having trouble paying bills should tell their mortgage lender, landlord, utility or other creditors, she advises. Creditors will likely work out a repayment plan if customers are honest about their problems.
"The one thing about payday loans is you can't call them and say, 'I'm going to be a little short on my paycheck this week,'" she says. "Payday-loan companies want their money, and they are going to get their money" when they have access to your account.
Consumers also can turn to nonprofits, social service agencies and credit unions for help, Gary says. MECU, for instance, offers a free credit repair workshop to the public. Gary will be speaking about payday loans at this month's workshop.
Gary still hears from payday lenders. Recently, one sent her a text message, calling her a "priority platinum" customer and inviting her to take out a loan. Despite what she went through, Gary is sometimes tempted. "It's an addictive thing," like drinking or gambling, she says.
But each time she gets the urge, she puts the amount of the payday loan fee into her bank account instead, slowly building up a cash cushion.
"It was the most terrible thing I could ever have gone through," she says. "I went through it. I came out of it. I'm flying. I'm happy."
To suggest a topic, contact Eileen Ambrose at 410-332-6984 or by e-mail at firstname.lastname@example.org.
Digging out from under Internet payday loans
Don't put yourself in a deeper hole by taking out another payday loan to pay on a payday loan taken out earlier.
Low-income Marylanders needing legal help can contact the Legal Aid Bureau's hot line for assistance or a referral at 410-951-7777.
Some lenders are exempt from Maryland law. Still, many Internet payday lenders, no matter where they are based, must follow state law when dealing with Maryland consumers.
If there is a problem, residents should file a written complaint against suspected violators with the Maryland Commissioner of Financial Regulation, 500 N. Calvert St., Suite 402, Baltimore 21202. Violators won't be able to collect fees or the principal on illegal loans, says Joseph E. Rooney, deputy commissioner.
Consumers have the right to stop payday lenders from making electronic withdrawals if the loan has built-in loan renewals. Call your bank, which also might require written confirmation. Write the payday lender that it is no longer authorized to debit your account.
Check other consumer rights at www.paydayloaninfo.org.
[Sources: Consumer Federation of America, Legal Aid Bureau, Department of Labor, Licensing and Regulation]