A vicious cycle of debt
Shondra McCalebb of Hanover Park has struggled to pay utilities, rent, food and other bills while raising her four children.
In the process, she has learned firsthand how short-term relief -- particularly in the form of high-interest emergency loans -- can become a long-term nightmare.
When one child was diagnosed with mental illness and another later with a blood disease, McCalebb took all of her vacation and sick days and even unpaid time off to help them.
But that time off translated into smaller paychecks while the bills were mounting. Her $14.13-an-hour job at a Carol Stream home improvement store just wasn't stretching far enough.
She needed to keep a roof over her family, food on the table and the lights on. But she felt she had nowhere to turn. Even her parents were on disability and living out of state.
A single mom, she needed cash fast. So, she looked in a phone book and found a payday loan store. Then she started exploring other longer-term installment loans.
She eventually signed up for five payday and installment loans -- each from a different lender, each with a different payment plan.
One was a $450 loan with an annual interest rate of 702 percent. With a schedule of 10 payments from April through August, her total payback cost will be $1,337.65.
"Am I embarrassed? Yes," said McCalebb. "But I don't know what to do. What do I do? I have to figure out a way to pay the bills."
A 2005 state law that regulates payday loans has been skirted by lenders, critics say, by extending the time period beyond the allowed 120 days and charging excessive triple-digit interest.
An amendment to the state law designed to help protect consumers has stalled in the House and likely won't be up until next year.
That could be another year of more victims, said Gregary Brown, director of social programs at Metropolitan Family Services in Chicago.
"Predatory products like these loans, offered to people who don't understand the terms, is a lot like the mortgage crisis," Brown said. "They'll end up in a worse position."
About 1,400 companies are licensed in Illinois to provide installment loans. Of those firms, 484 also have licenses to provide payday loans, according to the Illinois Department of Financial and Professional Regulation, which oversees the industry.
Payday and other loan products are offered by such companies as Americash, All Credit Lenders, Pay Day Loan Store, Check 'N Go and Check Into Cash.
Cleveland, Tenn.-based Check Into Cash, for example, has about 1,200 stores in 30 states, including 50 stores in Illinois, said the company's vice president of government affairs, Jabo Covert.
"There is definitely a demand for these types of products and there's clearly a need," said Covert. "But we want to reasonably meet that demand."
The demand is evident. Licensed firms in Illinois offering payday loans issued 23,025 new loans during March, the latest data available from the state.
The state enacted a bill about three years ago that protected consumers who wanted payday loans. It also limited the time period up to 120 days and interest rates of such loans.
But then lenders began offering longer-term loans for higher annual interest rates, some more than 700 percent.
"We need to stop the cycle," said Dean Martinez, secretary of the Illinois Department of Financial and Professional Regulation. "These lenders have a goal, and that is for you to never get out."
An amendment stalled this week in the House and legislators vowed to work over the summer to help protect consumers who want installment loans. The stalled amendment attempted to also provide interest rate caps.
"Consumers will be vulnerable for another year," said Martinez.
McCalebb eventually sought help at the Metropolitan Family Services' DuPage Center. She's part of the Family Self-Sufficiency program.
McCalebb said she's learned from her experience and aims to pay off her debts.
"If I can stop people from getting into my situation, I'll feel that I've helped them," she said.