Critics of "payday loans," which charge a median rate of 521 percent annual interest in Utah, say they can easily lead to bankruptcy and misery. Patty Bailey could be their poster child.

But the payday loan industry itself would rather point to borrowers like Tammy Ruiz, who uses such loans rarely for emergencies and views them as a godsend.

Most payday borrowers, like Megan Pedersen, are likely somewhere between those extremes. She occasionally has landed in trouble with the loans but has managed to work out of it and still uses them. But she only uses them when she has no alternative in emergencies, she says.

Following are their stories:

Patty Bailey

Bailey, of Kearns, says she lived paycheck to paycheck. Once when finances were especially tight, she walked into a payday loan store on State Street.

She presented a bank statement, a paycheck stub and identification — and was instantly loaned $300. She faced no credit checks and avoided the embarrassment of asking family for money. She was thrilled.

But she paid more than 500 percent interest on that two-week loan. She says she probably did not realize the interest rate was that high as cashiers glossed over terms quickly and asked her to sign.

"I paid it back in two weeks, and managed to handle the first loans I had. Then things got out of hand," she said.

She hated her job at the time. She decided to take out payday loans to help her invest in work-at-home programs, which did not work out. She found she could not pay off her payday loans when due, so she extended them by paying two weeks' worth of interest at a time. One $300 loan would end up costing $1,300 over time, she later figured.

After buying more time on loans each payday, she found she often didn't have enough to live on, so sometimes she would take out yet more payday loans. At one point, she says she had seven to nine of them.

"About half of my paycheck was going to them," she said.

It was stressful, and she suffers from stress-induced diabetes. She soon became ill and could not work.

"Then everything fell to pieces," she said.

She could not afford to pay interest on loans, which were then considered in default. Lenders attempted to deposit the post-dated checks she had given as security, and they bounced.

Lenders attempted to redeposit checks several times, and her bank charged her a fee of $22 for non-sufficient funds each time. Some lenders attempted, as she had agreed to in the fine print of her loans, to take out money from her account by electronic means. That brought more insufficient funds fees.

Lenders garnisheed her wages. Collectors called daily by phone and in person. Civil lawsuits were filed against her. One lender, her records show, threatened to pursue criminal charges against her for writing bad checks but still offered to give her new loans if she paid off her old one.

"Finally, I filed for bankruptcy to stop it all. . . . I am still paying every month on those debts," she said.

"Even after everything that happened, I still get e-mails sometimes saying I am qualified for up to a $1,500 payday loan. I'm tempted, and then I slap myself," she said. "These loans are just as addicting as drugs, cigarettes and gambling."

Tammy Ruiz

Ruiz, of Saratoga Springs, says her experience with payday lenders has been good.

"I've had to obtain a few of those loans over a two-year period. I haven't had to extend any of them," she said. "It's often for emergency reasons, like pharmacy or medical."

She added, "I would rather go to a company like that than to borrow from a friend or relative."

She adds that she has no credit cards, even though the interest they charge is far lower than payday lenders: 18 percent APR compared to 500 percent.

"I don't believe in credit cards," she said, adding she has heard of too many people getting into deep debt with them and taking years to pay them off. She says payday loans allow her to get what she needs now and pay it back quickly.

"I weigh what I need it for. They have saved me a lot on fees from my bank. They are cheaper than fees for a bounced check," she said.

Ruiz said, "They are probably a last resort." She adds she has been treated well by pleasant, friendly people at the stores. But she says she is also working with a debt counseling service to improve finances and to avoid the need for such loans.

Megan Pedersen

Pedersen says when she faced tough financial times, she noticed the bright yellow or green awnings of payday lenders that seemed like they are on every corner. She took out her first payday loan seven years ago. She still uses them now.

"The first time I did it was to cover bills," she said. "It was to cover basic living expenses. My roommate at the time was unemployed, and I was working at a bar mostly for tips. It wasn't enough for utilities and rent."

She said, "I didn't want to go to my parents. I had borrowed from them in the past, and I wanted to prove my independence."

She eventually had some problems with such loans. She would often extend them at high interest because two weeks usually was not enough time to raise money to pay them off and still afford to live.

"Now I when I take one, I plan on using the full 12 weeks to pay it back," as allowed for loan "roll overs" under Utah law, she says.

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She says she has missed an extension date for loans on occasion. She has had lenders try to deposit the post-dated check she had given as security, only to have them bounce because she did not have enough money in her account. But she worked through such problems. She said payday lenders were happy to loan more money once such problems were fixed.

Pedersen, who now works as a receptionist and plans to graduate from college soon with a marketing degree, says she still uses payday loans on occasion because, as a student, money and her lower-fee student loans were not sufficient.

Her advice for others? "Use them only as a last resort, definitely. Do not use them for fun or extra cash. It can put you in a cycle that is hard to get out of. It is really hard. Don't do it unless you are confident you can pay it back. If you do roll over a loan, pay back more than you have to. It will save some on interest."


E-mail: lee@desnews.com

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