Should I Take Out a Payday Loan?

Payday loans thrive due to their small repayment windows. The personal loans—which are generally taken out by those who need a couple hundred dollars, quickly—feature extremely high interest rates, and are often due within two and four weeks (short-term loan) of when they’re initiated. When, for whatever reason, the borrower cannot pay the loan amount off to the payday lender, the interest continues to roll over—potentially, eventually, snowballing to a massive size.

“I would encourage people to never take out a payday loan,” says David Humphreys, a consumer attorney in Tulsa, Oklahoma. “We have tens of thousands of people in the state who are getting social security, retirement. … These [bad-acting lenders] figure out a way to get into that, taking their money and leaving them totally broke.”

Humphreys’ outlook for those Americans stuck in the vicious cycle of debt is grim; just about the only way out, according to him, is to file for bankruptcy. “If you take out one of these loans, you can get out of it by either death, bankruptcy or disappearing,” he says. “They’re horrific; they’re traps.”

Humphrey and his law partner, Luke Wallace, work cases involving unfair debt collection, identity theft, car-dealing fraud, predatory loans and predatory mortgage servicing. While Oklahoma doesn’t have any direct protection for consumers from payday loans, the duo’s arguments usually deal in the Oklahoma Consumer Protection Act, fraud, or even invasion of privacy.

“One lady in one town worked at city hall, and there’s only 30 employees,” Humphreys says. “This small-dollar lender called every extension and left a message about her loan. They got away with it, but that’s harassment, abusive.”

Wallace notes that some payday shops hold themselves out as financial advisors, but that a bank or credit union wouldn’t loan you money unless they thought you could pay it back. “The entire system is set up to intimidate the less-sophisticated,” adds Humphreys. “They’ll sit you down at a work station, they’ve got a uniform and a computer system. They seem to have a lot of power over you, and they’ll tell you what you need to do and how to get out of it.

“Some of them will even take a security interest in the family bible or a child’s treasured musical instrument,” he continues, “then threaten, ‘We’re going to take your bible if you don’t pay.’”

Though both Humphreys and Wallace advise avoiding payday loans at all costs, they know that, for some living to their next paycheck or cash advance, they will become seemingly unavoidable. “The idea that it’s not going to happen is not real. People are going to take out those loans,” Wallace says. “But before they do, they need to have a path to get out—because their business model is to trap you, suck everything out of you until the last thing you can do is file bankruptcy or die. So go in there with your guard up, and have a plan to pay it off as soon as possible so you don’t have to renew the loan.”

To that effect, if you or someone you know has taken out a payday loan and been unfairly taken advantage of by a wrongdoing lender, reach out to a qualified, experienced attorney in Oklahoma.

For more information on payday lending, credit scores and credit reports, the Consumer Financial Protection Bureau (CFPB), debt consolidation, and debt traps, see our overviews of consumer law and debt collections.