Five years ago, Naya Burks of St. Louis borrowed $1,000 from AmeriCash Loans. The money came at a steep price: She had to pay back $1,737 over six months.
"I really needed the cash, and that was the only thing that I could think of doing at the time," she said. The decision has hung over her life ever since.
A single mother who works unpredictable hours at a chiropractor's office, she made payments for a couple of months, then she defaulted.
So AmeriCash sued her, a step that high-cost lenders – makers of payday, auto-title and installment loans – take against their customers tens of thousands of times each year. In just Missouri and Oklahoma, which have court databases that allow statewide searches, such lenders file more than 29,000 suits annually, according to a ProPublica analysis.
ProPublica's examination shows that the court system is often tipped in lenders' favor, making lawsuits profitable for them while often dramatically increasing the cost of loans for borrowers.
High-cost loans already come with annual interest rates ranging from about 30 percent to 400 percent or more. In some states, if a suit results in a judgment – the typical outcome – the debt can then continue to accrue at a high interest rate. In Missouri, there are no limits on such rates.
Many states also allow lenders to charge borrowers for the cost of suing them, adding legal fees on top of the principal and interest they owe. One major lender routinely charges legal fees equal to one-third of the debt, even though it uses an in-house lawyer and such cases usually consist of filing routine paperwork. Borrowers, meanwhile, are rarely represented by an attorney.
After a judgment, lenders can garnish borrowers' wages or bank accounts in most states. Only four states prohibit wage garnishment for most debts, according to the National Consumer Law Center; in 20, lenders can seize up to one-quarter of borrowers' paychecks. Since the average borrower who takes out a high-cost loan is already stretched to the limit, with annual income typically below $30,000, losing such a large portion of their pay "starts the whole downward spiral," said Laura Frossard of Legal Aid Services of Oklahoma.
The peril is not just financial. In Missouri and other states, debtors who don't appear in court also risk arrest.
As ProPublica has previously reported, the growth of high-cost lending has sparked battles across the country. In response to efforts to limit interest rates or otherwise prevent a cycle of debt, lenders have fought back with campaigns of their own and by transforming their products.
Lenders argue their high rates are necessary if they are to be profitable and that the demand for their products is proof they provide a valuable service. When they file suit against their customers, they do so only as a last resort and always in compliance with state law, lenders contacted for this article said.
After AmeriCash sued Burks in September 2008, she found her debt had grown to more than $4,000. She agreed to pay it back, bit by bit. If she didn't, AmeriCash won the right to seize a portion of her pay.
Ultimately, AmeriCash took more than $5,300 from Burks' paychecks. Typically $25 per week, the payments made it harder to cover basic living expenses, Burks said. "Add it up: As a single parent, that takes away a lot."
But those years of payments brought Burks no closer to resolving her debt. Missouri law allowed it to continue growing at the original interest rate of 240 percent – a tide that overwhelmed her small payments. So even as she paid, she plunged deeper and deeper into debt.
By this year, that $1,000 loan Burks took out in 2008 had grown to a $40,000 debt, almost all of which was interest. After ProPublica submitted questions to AmeriCash about Burks' case, however, the company quietly and without explanation filed a court declaration that Burks had completely repaid her debt.
Had it not done so, Burks would have faced a stark choice: declare bankruptcy or make payments for the rest of her life.
Appointed to Missouri's associate circuit court in St. Louis last year by Gov. Jay Nixon, Judge Christopher McGraugh came to the bench with 25 years' experience as an attorney in civil and criminal law. But, he said, "I was shocked" at the world of debt collection.
As in Burks' case, high-cost lenders in Missouri routinely ask courts to hand down judgments that allow loans to continue growing at the original interest rate. Initially, he refused, McGraugh said, because he feared that would doom debtors to years, if not a lifetime, of debt.
"It's really an indentured servitude," he said. "I just don't see how these people can get out from underneath [these debts]."
But he got an earful from the creditors' attorneys, he said, who argued that Missouri law was clear: The lender has an unambiguous right to obtain a post-judgment interest rate equal to that in the original contract. McGraugh studied the law and agreed: His hands were tied.
Now, in situations where he sees a debt continuing to build despite years of payments by the debtor, the best he can do is urge the creditor to work with the debtor. "It's extremely frustrating," he said.
Since the beginning of 2009, high-cost lenders have filed more than 47,000 suits in Missouri, according to a ProPublica analysis of state court records. In 2012, the suits amounted to 7 percent of all collections suits in the state. Missouri law allows lenders to charge unlimited interest rates, both when originating loans and after winning judgments.
Borrowers such as Burks often do not know how much they have paid on their debt or how much they owe. When creditors seek to garnish wages, the court orders are sent to debtors' employers, which are responsible for deducting the required amount, but not to the debtors themselves.
AmeriCash, for instance, was not required to send Burks any sort of statement after the garnishment began. She learned from a reporter how much she had paid – and how much she still owed.
After AmeriCash's deduction and another garnishment related to a student loan, Burks said she took home around $460 each week from her job.
No court oversees the interest that creditors such as AmeriCash charge on post-judgment debts. For instance, the judgment that Burks and an attorney for AmeriCash signed says that her debt will accrue at 9 percent interest annually. Instead, AmeriCash appears to have applied her contractual rate of 240 percent a year.
That seems unjustified, McGraugh said. "I would believe you're bound by the agreement you made in court."
In the past five years, AmeriCash has filed more than 500 suits in Missouri. The suits often result in cases like Burks', with exploding debts. One borrower took out a $400 loan in late 2005 and by 2012 had paid $3,573 – but that didn't stop the interest due on the loan from ballooning to more than $16,000. (As in Burks' case, AmeriCash relieved that debtor of his obligation after ProPublica submitted a list of questions to the company.)
AmeriCash, a private company based in a Chicago suburb, has five stores in Missouri, as well as 60 more across four other states. The company did not respond to repeated phone calls and emails about its practices. The firm's attorney, Wally Pankowski of the Evans & Dixon law firm, declined to comment.
Cases in which lawsuits led to exploding debts abound in Missouri, and ProPublica found examples involving several different lenders.
Erica Hollins of St. Louis took out a $100 loan from Loan Express just before Christmas 2006. She soon fell behind on the payments, but instead of suing immediately, the company waited, the debt growing at 200 percent interest all the while. When the company sued two and a half years later, it received a judgment to collect on $913, including interest.
For years, the company garnished Hollins' paychecks from her job at a nursing home. When, after a total of nearly $3,600 in payments, Hollins still had not cleared her debt, she called Loan Express' attorney, she said. As in Burks' case, the lender was represented by Pankowski. "I asked him would I ever be done paying for this?" she recalled. "And he said, ‘Maybe, maybe not.' " (Pankowski declined to comment on the case.)
Hollins sought legal help. Now she's filed suit against the company, alleging it intentionally delayed suing so that her debt would multiply. The suit is ongoing.
Todd Stimson, who owns Loan Express, as well as three other stores in Illinois, said his company waited to sue Hollins because he believed her wages were already being garnished by another creditor. He also said his company gave her ample opportunity to avoid a suit in the first place but that Hollins didn't pay. Companies like his have to sue in such situations, he said. Otherwise, "word gets out in the neighborhood, ‘Oh, you won't get sued anyway, just don't pay them.'"
As for Hollins paying back more than 35 times what she borrowed, Stimson said his company might have stopped the garnishment if Hollins had asked, although he added that "legally, I don't have to."
Not all lenders pursue as much as they are legally entitled to. Some lenders charge triple-digit rates in their contracts, but they lower the rate after receiving a judgment.
Speedy Cash, for instance, has filed at least 9,382 lawsuits in Missouri over the past five years, more than any other high-cost lender, according to ProPublica's analysis. It has six stores in the state, in addition to making loans online.
Speedy Cash's loans can be very expensive. A 2011 contract for a $400 loan, for instance, shows a 389 percent annual interest rate and total payments of $2,320 over a year and a half.