Journalism in the Public Interest

The 182 Percent Loan: How Installment Lenders Put Borrowers in a World of Hurt

Many people know the dangers of payday loans. But “installment loans” also have sky-high rates and work by getting borrowers — usually poor — to renew over and over. We take you inside one of the biggest installment lenders, billion-dollar World Finance.

Katrina Sutton of McDonough, Ga., stands outside the World Finance storefront where she took out an installment loan in August 2009. (Erik S. Lesser/EPA for ProPublica)


This story was co-produced with Marketplace. Listen to their coverage.

One day late last year, Katrina Sutton stood at a gas pump outside Atlanta and swiped her debit card. Insufficient funds. But that couldn't be. She'd been careful to wait until her $270 paycheck from Walmart had hit her account. The money wasn't there? It was all she had. And without gas, she couldn't get to work.

She tried not to panic, but after she called her card company, she couldn't help it. Her funds had been frozen, she was told, by World Finance.

Sutton lives in Georgia, a state that has banned payday loans. But World Finance, a billion-dollar company, peddles installment loans, a product that often drives borrowers into a similar quagmire of debt.

World is one of America's largest providers of installment loans, an industry that thrives in at least 19 states, mostly in the South and Midwest; claims more than 10 million customers; and has survived recent efforts by lawmakers to curtail lending that carries exorbitant interest rates and fees. Installment lenders were not included in a 2006 federal law that banned selling some classes of loans with an annual percentage rate above 36 percent to service members — so the companies often set up shop near the gates of military bases, offering loans with annual rates that can soar into the triple digits.

Installment loans have been around for decades. While payday loans are usually due in a matter of weeks, installment loans get paid back in installments over time — a few months to a few years. Both types of loans are marketed to the same low-income consumers, and both can trap borrowers in a cycle of recurring, expensive loans.

Installment loans can be deceptively expensive. World and its competitors push customers to renew their loans over and over again, transforming what the industry touts as a safe, responsible way to pay down debt into a kind of credit card with sky-high annual rates, sometimes more than 200 percent.

And when state laws force the companies to charge lower rates, they often sell borrowers unnecessary insurance products that rarely provide any benefit to the consumer but can effectively double the loan's annual percentage rate. Former World employees say they were instructed not to tell customers the insurance is voluntary.

When borrowers fall behind on payments, calls to the customer's home and workplace, as well as to friends and relatives, are routine. Next come home visits. And as Sutton and many others have discovered, World's threats to sue its customers are often real.

The Consumer Financial Protection Bureau, the new federal agency charged with overseeing consumer-finance products and services, has the power to sue nonbank lenders for violating federal laws. It could also make larger installment lenders subject to regular examinations, but it hasn't yet done so. Installment companies have supported Republican efforts to weaken the agency, echoing concerns raised by the lending industry as a whole.

The CFPB declined to comment on any potential rule-making or enforcement action.

Despite a customer base that might best be described as sub-subprime, World comfortably survived the financial crisis. Its stock, which trades on the Nasdaq under the company's corporate name, World Acceptance Corp., has nearly tripled in price in the last three years. The company services more than 800,000 customers at upward of 1,000 offices in 13 states. It also extends into Mexico, where it has about 120,000 customers.

In a written response to questions for this story, World argued that the company provides a valuable service for customers who might not otherwise qualify for credit. The loans are carefully underwritten to be affordable for borrowers, the company said, and since the loans involve set monthly payments, they come with a "built-in financial discipline."

The company denied that it deceives customers, saying that it trains its employees to tell borrowers that insurance products are voluntary and that it also informs customers of this in writing. It said it contacts delinquent borrowers at their workplace only after it has failed to reach them at their homes and that it resorts to lawsuits to recoup delinquent payments in accordance with state laws.

"World values its customers," the company wrote, "and its customers demonstrate by their repeat business that they value the service and products that World offers."

The installment industry promotes its products as a consumer-friendly alternative to payday loans. Installment loans are "the safest form of consumer credit out there," said Bill Himpler, the executive vice president of the American Financial Services Association, of which World and other major installment lenders are members.

About 5 percent of World's customers, approximately 40,000, are service members or their families, the company said. According to the Defense Department, active-duty military personnel and their dependents comprise about 1 percent of the U.S. population.

The Starter Loan

(Erik S. Lesser/EPA for ProPublica)

Katrina Sutton’s loan contract. Although she walked out of the World Finance store with a check for $207, she agreed to pay a total of $350, including interest, fees and insurance. (Erik. S. Lesser/EPA for ProPublica)

Back in August 2009, Sutton's 1997 Crown Victoria needed fixing, and she was "between paychecks," as she put it. Some months, more than half of her paycheck went to student-loan bills stemming from her pursuit of an associate degree at the University of Phoenix. Living with her mother and grandparents saved on rent, but her part-time job as a Walmart cashier didn't provide much leeway. She was short that month and needed her car to get to work.

She said she happened to pass by a World Finance storefront in a strip mall in McDonough, Ga. A neon sign advertised "LOANS," and mirrored windows assured privacy. She went inside.

A credit check showed "my FICO score was 500-something," Sutton remembered, putting her creditworthiness in the bottom 25 percent of borrowers. "But they didn't have no problem giving me the loan."

She walked out with a check for $207. To pay it back, she agreed to make seven monthly payments of $50 for a total of $350. The loan papers said the annual percentage rate, which includes interest as well as fees, was 90 percent.

Sutton had received what World employees call a "starter loan." That's something Paige Buys learned after she was hired to work at a World Finance branch in Chandler, Okla., at the age of 18. At that point, she only had a dim notion of what World did.

At 19, she was named branch manager (the youngest in company history, she remembered being told), and by then she had learned a lot. And the more she understood, the more conflicted she felt.

"I hated the business," she said. "I hated what we were doing to people. But I couldn't just quit."

The storefront, which lies on the town's main artery, Route 66, is very much like the one where Sutton got her loan. Behind darkened windows sit a couple of desks and a fake tree. The walls are nearly bare. Typical of World storefronts, it resembles an accountant's office more than a payday loan store.

Buys said any prospective borrower was virtually guaranteed to qualify for a loan of at least $200. Low credit scores are common, she and other former employees said, but World teaches its employees to home in on something else: whether at least some small portion of the borrower's monthly income isn't already being consumed by other debts. If, after accounting for bills and some nominal living expenses, a customer still has money left over, World will take them on.

In its written response, World said the purpose of its underwriting procedures was to ensure that the borrower has enough income to make the required payments.

With few exceptions, World requires its customers to pledge personal possessions as collateral that the company can seize if they don't pay. The riskier the client, the more items they were required to list, former employees say.

Sutton offered two of her family's televisions, a DVD player, a PlayStation and a computer. Together, they amounted to $1,600 in value, according to her contract. In addition, World listed her car.

There are limits to what World and other lenders can ask borrowers to pledge. Rules issued in 1984 by the Federal Trade Commission put "household goods" such as appliances, furniture and clothing off limits — no borrower can be asked to literally offer the shirt off his back. One television and one radio are also protected, among other items. But the rules are so old, they make no mention of computers.

Video game systems, jewelry, chainsaws, firearms — these are among the items listed on World's standard collateral form. The contracts warn in several places that World has the right to seize the possessions if the borrower defaults.

"They started threatening me," a World customer from Brunswick, Ga., said. "If I didn't make two payments, they would back a truck up and take my furniture, my lawn mower." (In fact, furniture is among the items protected under the FTC rule.) The woman, who asked to remain anonymous because she feared the company's employees, was most upset by the prospect of the company taking her piano. She filed for bankruptcy protection last year.

In fact, former World employees said, it was exceedingly rare for the company to actually repossess personal items.

"Then you've got a broken-down Xbox, and what are you going to do with it?" asked Kristin, who worked in a World branch in Texas in 2012 and, from fear of retaliation, asked that her last name not be used.

World supervisors "would tell us, 'You know, we are never going to repossess this stuff' — unless it was a car," Buys said.

World acknowledged in its response that such repossessions are rare, but it said the collateral played a valuable role in motivating borrowers. "World believes that an important element of consumer protection is for a borrower to have an investment in the success of the transaction," the company wrote. When "borrowers have little or no investment in the success of the credit transaction they frequently find it easier to abandon the transaction than to fulfill their commitments."

'Real Gibberish'

Sutton's loan contract said her annual percentage rate, or APR, was 90 percent. It wasn't. Her effective rate was more than double that: 182 percent.

World can legally understate the true cost of credit because of loopholes in federal law that allow lenders to package nearly useless insurance products with their loans and omit their cost when calculating the annual rate.

As part of her loan, Sutton purchased credit life insurance, credit disability insurance, automobile insurance and non-recording insurance. She, like other borrowers ProPublica interviewed, cannot tell you what any of them are for: "They talk so fast when you get that loan. They go right through it, real gibberish."

The insurance products protect World, not the borrower. If Sutton were to have died, become disabled, or totaled her car, the insurer would have owed World the unpaid portion of her loan. Together, the premiums for her $200 loan total $76, more than the loan's other finance charges.

The insurance products provide a way for World to get around the rate caps in some states and effectively to charge higher rates. Sutton's stated annual percentage rate of 90 percent, for example, is close to the maximum that can legally be charged in Georgia.

ProPublica examined more than 100 of the company's loans in 10 states, all made within the last several years. A clear pattern developed: In states that allowed high rates, World simply charged high interest and other finance fees but did not bother to include insurance products. For a small loan like Sutton's, for example, World has charged a 204 percent annual rate in Missouri and 140 percent in Alabama, states that allow such high levels.

In states with more stringent caps, World slapped on the insurance products. The stated annual rate was lower, but when the insurance premiums were accounted for, the loans were often even more expensive than those in the high-rate states.

"Every new person who came in, we always hit and maximized with the insurance," said Matthew Thacker, who worked as an assistant manager at a World branch in Tifton, Ga., from 2006 to 2007. "That was money that went back to the company."

World profits from the insurance in two ways: It receives a commission from the insurer, and, since the premium is typically financed as part of the loan, World charges interest on it.

"The consumer is screwed six ways to Sunday," said Birny Birnbaum, the executive director of the nonprofit Center for Economic Justice and a former associate commissioner at the Texas Department of Insurance.

Industry data reveal just how profitable this part of World's business is. World offers the products of an insurer called Life of the South, a subsidiary of the publicly traded Fortegra Financial Corp. In Georgia in 2011, the insurer received $26 million in premiums for the sort of auto insurance Sutton purchased as part of her loan. Eighteen million dollars, or 69 percent, of that sum went right back to lenders like World. In all, remarkably little money went to pay actual insurance claims: about 5 percent.

The data, provided to ProPublica by the National Association of Insurance Commissioners, paint a similar picture when it comes to Life of the South's other products. The company's credit accident and health policies racked up $20 million in premiums in Georgia in 2011. While 56 percent went back to lenders, only 14 percent went to claims. The pattern holds in other states where World offers the products.

Fortegra declined to comment.

Gretchen Simmons, who managed a World branch in Pine Mountain, Ga., praised the company for offering customers loans they might not have been able to get elsewhere. She said she liked selling accidental death and disability insurance with loans, because many of her clients were laborers who were "more prone to getting their finger chopped off."

According to several contracts reviewed by ProPublica, losing one finger isn't enough to make a claim. If the borrower loses a hand, the policy pays a lump sum (for instance, $5,000). But, according to the policy, "loss of a hand means loss from one hand of four entire fingers."

Simmons took out a loan for herself from a World competitor — and made sure to decline the insurance. Why? "Because I knew that that premium of a hundred and blah blah blah dollars that they're charging me for it can go right into my pocket if I just deny it."

In its written response, World alleged that Simmons had been fired from the company because of "dishonesty and alleged misappropriation of funds," but it refused to provide further details. Simmons, who worked for World from 2005 to 2008, denied that she left the company on bad terms.

Federal rules prohibit the financing of credit insurance premiums as part of a mortgage but allow it for installment and other loans. Installment lenders can also legally exclude the premiums when calculating the loan's annual percentage rate, as long as the borrower can select the insurer or the insurance products are voluntary — loopholes in the Truth in Lending Act, the federal law that regulates how consumer-finance products are marketed.

World's contracts make all legally necessary disclosures. For example, while some insurance products are voluntary, World requires other types of insurance to obtain a loan. For mandatory insurance, Sutton's contract states that the borrower "may choose the person or company through which insurance is to be obtained." She, like most customers, wouldn't know where to begin to do that, even if it were possible.

"Nobody is going to sell you insurance that protects your loan, other than the lender," said Birnbaum. "You can't go down the street to your State Farm agent and get credit insurance."

When insurance products are optional — meaning the borrower can deny coverage but still get the loan — borrowers must sign a form saying they understand that. "We were told not to point that out," said Thacker, the former Tifton, Ga., assistant manager.

World, in its response to ProPublica, declined to offer any statistics on what percentage of its loans carry the insurance products, but it said employees are trained to inform borrowers that they are voluntary. As for why the company offers the insurance products in some states and not in others, World said it depends on state law and if "it makes business sense to do so."

Buys, the former Chandler, Okla., branch manager, said she found the inclusion of the insurance products particularly deceitful. In Oklahoma, World can charge high interest rates and fees on loans under $1,000 or so, so it typically doesn't include insurance on those loans. But it often adds the products to larger loans, which has the effect of jacking up the annual rate.

"You were supposed to tell the customer you could not do the loan without them purchasing all of the insurance products, and you never said 'purchase,' " Buys recalled. "You said they are 'included with the loan' and focused on how wonderful they are."

It was not long into her tenure that Buys said she began to question whether the products were really required. She asked a family friend who was an attorney if the law required it, she recalled, and he told her it didn't.

World trained its employees to think of themselves as a "financial adviser" to their clients, Buys said. She decided to take that literally.

When a customer took out a new loan, "I started telling them, 'Hey, you can have this insurance you're never going to use, or you can have the money to spend,'" she recalled. Occasionally, a customer would ask to have the disability insurance included, so she left it in. But mostly, people preferred to take the money.

One day, she remembered, she was sitting across from a couple who had come into the office to renew their loan. They were discussing how to cover the costs of a funeral, and Chandler being a small town, she knew it was their son's. On her screen were the various insurance charges from the original loan. The screen "was blinking like I could edit it," she recalled.

At that moment, she realized that she could advise customers renewing their loans that they could drop the insurance from their previous loans. If they did so, they'd receive several hundred dollars more. The couple excitedly agreed, she recalled, and other customers also thought it was good advice and dropped the products.

Buys' regional supervisor threatened to discipline her, Buys said. But it was hard to punish her for advising customers that the products were voluntary when they were. "All they could do was give me the stink eye," Buys said.

But World soon made it harder to remove the insurance premiums, Buys said. She couldn't remove them herself but instead had to submit a form, along with a letter from the customer, to World's central office. That office, she said, sometimes required borrowers to purchase the insurance in order to get the loans.

World, in its response to ProPublica's questions, said Buys' assertions about how it handled insurance were "false," but it declined to provide further details.

Eventually, Buys said, her relationship with management deteriorated to the point that she felt she had no choice but to quit. By the time she left in 2011, she had worked at World for three years.

World, in the answers provided to ProPublica, said that when Buys quit, she was "subject to being terminated for cause including dishonesty and alleged misappropriation of funds." The company declined to provide any details about the allegations, but after Buys quit, World filed suit in county court, accusing her of stealing money from the company. Buys retained an attorney and responded, maintaining her innocence and demanding proof of any theft. World withdrew the suit.

'It's All About Keeping Them'

Sutton's original loan contract required her to make seven payments of $50, at which point her loan would have been fully paid off.

But if World can persuade a customer to renew early in the loan's lifespan, the company reaps the lion's share of the loan's charges while keeping the borrower on the hook for most of what they owed to begin with. This is what makes renewing loans so profitable for World and other installment lenders.

"That was the goal, every single time they had money available, to get them to renew, because as soon as they do, you've got another month where they're just paying interest," says Kristin, the former World employee from Texas.

(Erik S. Lesser/EPA for ProPublica)

Katrina Sutton at her home in McDonough, Ga. She recalled that less than four months from taking out her initial installment loan, World Finance asked her to refinance. She received $44, the amount of principal she had paid back so far. (Erik S. Lesser/EPA for ProPublica)

Sure enough, less than four months after taking out the initial loan, Sutton agreed to renew.

In a basic renewal (the company calls it either a "new loan" or a "refinance"), the borrower agrees to start the loan all over again. For Sutton, that meant another seven months of $50 payments. In exchange, the borrower receives a payout. The amount is based on how much the borrower's payments to date have reduced the loan's principal.

For Sutton, that didn't amount to much. She appears to have made three payments on her loan, totaling $150. (The company's accounting is opaque, and Sutton does not have a record of her payments.) But when she renewed the loan, she received only $44.

Most of Sutton's payments had gone to cover interest, insurance premiums and other fees, not toward the principal. And when she renewed her loan a second time, it was no different.

The effect is similar to how a mortgage amortizes: The portion of each payment that goes toward interest is at its highest the first month and decreases with each payment. As the principal is reduced, less interest is owed each month. By the end of the loan, the payments go almost entirely toward paying down the principal.

World regularly sends out mailers, and its employees make frequent phone calls, all to make sure borrowers know they have funds available. Every time a borrower makes a payment, according to the company, that customer "receives a receipt reflecting, among other information, the remaining balance on the borrower's loan and, where applicable, the current new credit available for that borrower." And when a borrower visits a branch to make a payment, former employees say, employees are required to make the pitch in person.

"You have to say, 'Let me see what I can do to get you money today,'" Buys recalled. If the borrower had money available on the account, it had to be offered, she and other former employees said.

The typical pitch went like this, Kristin said: "'Oh, by the way, you've got $100 available, would you like to take that now or do you want to wait till next month?'"

Customers would ask, "'Well, what does this mean?'" Buys said. "And you say, 'Oh, you're just starting your loan over, you know, your payments will be the same.'"

The company often encourages customers to renew the loans by saying it will help them repair their credit scores, former employees said, since World reports to the three leading credit bureaus. Successively renewing loans also makes customers eligible for larger loans from World itself. After renewing her loan twice, for instance, Sutton received an extra $40.

"We were taught to make [customers] think it was beneficial to them," Buys said.

"Retail (i.e., consumer) lending is not significantly unlike other retail operations and, like those other forms of retail, World does market its services," the company wrote in its response to questions.

About three-quarters of the company's loans are renewals, according to World's public filings. Customers often renew their loans after only two payments, according to former employees.

The company declined to say how many of its renewals occur after two payments or how many times the average borrower renews a loan. Renewals are only granted to borrowers who can be expected to repay the new loan, it said.

Lawsuits against other major installment lenders suggest these practices are common in the industry. A 2010 lawsuit in Texas claimed that Security Finance, a lender with about 900 locations in the United States, induced a borrower to renew her loan 16 times over a three-year period. The suit was settled. In 2004, an Oklahoma jury awarded a mentally disabled Security Finance borrower $1.8 million; he had renewed two loans a total of 37 times. After the company successfully appealed the amount of damages, the case was settled. Security Finance declined to respond to questions about the suits.

Another 2010 suit against Sun Loan, a lender with more than 270 office locations, claims the company convinced a husband and wife to renew their loans more than two dozen times each over a five-year period. Cary Barton, an attorney representing the company in the suit, said renewals occur at the customer's request, often because he or she doesn't have enough money to make the monthly payment on the previous loan.

The predominance of renewals means that for many of World's customers, the annual percentage rates on the loan contracts don't remotely capture the real costs. If a borrower takes out a 12-month loan for $700 at an 89 percent annual rate, for example, but repeatedly renews the loan after four payments of $90, he would receive a payout of $155 with each renewal. In effect, he is borrowing $155 over and over again. And for each of those loans, the effective annual rate isn't 89 percent. It's 537 percent.

World called this calculation "completely erroneous," largely because it fails to account for the money the customer received from the original transaction. World's calculation of the annual percentage rate if a borrower followed this pattern of renewals for three years: about 110 percent.

A Decade of Debt

In every World office, employees say, there were loan files that had grown inches thick after dozens of renewals.

At not just one but two World branches, Emma Johnson of Kennesaw, Ga., was that customer. Her case demonstrates how immensely profitable borrowers like her are for the company — and how the renewal strategy can transform long-term, lower-rate loans into short-term loans with the triple-digit annual rates of World's payday competitors.

Since being laid off from her janitorial job in 2004, Johnson, 71, has lived primarily on Social Security. Last year, that amounted to $1,139 in income per month, plus a housing voucher and food stamps.

Johnson could not remember when she first obtained a loan from World. Nor could she remember why she needed either of the loans. She can tell you, however, the names of the branch managers (Charles, Brittany, Robin) who've come and gone over the years, her loans still on the books.

Johnson took out her first loan from World in 1993, the company said. Since that time, she has taken out 48 loans, counting both new loans and refinancings, from one branch. In 2001, she took out a loan from the second branch and began a similar string of renewals.

When Johnson finally declared bankruptcy early this year, her two outstanding loans had face values of $3,510 and $2,970. She had renewed each loan at least 20 times, according to her credit reports. Over the last 10 years, she had made at least $21,000 in payments toward those two loans, and likely several thousand dollars more, according to a ProPublica analysis based on her credit reports and loan documents.

Although the stated length of each loan was about two years, Johnson would renew each loan, on average, about every five months. The reasons varied, she said. "Sometimes stuff would just pop out of the blue," she said. This or that needed a repair, one of her children would need money.

Sometimes, it was just too enticing to get that extra few hundred dollars, she acknowledged. "In a sense, I think I was addicted."

It typically took only a few minutes to renew the loan, she said. The contract contained pages of disclosures and fine print, and the World employee would flip through, telling her to sign here, here and here, she recalled.

Her loan contracts from recent years show that the payouts were small, often around $200. That wasn't much more than the $115 to $135 Johnson was paying each month on each loan. The contracts had stated APRs ranging from about 23 percent to 46 percent.

But in reality, because Johnson's payments were largely going to interest and other fees, she was taking out small loans with annual rates typically in the triple digits, ranging to more than 800 percent. World also disputed this calculation.

As she continued to pay, World would sometimes increase her balance, providing her a larger payout, but her monthly payment grew as well. It got harder and harder to make it from one Social Security check to the next. In 2010, she took out another loan, this one from an auto-title lender unconnected to World.

Eventually, she gave up on juggling the three loans. By the end of each month, she was out of money. If she had to decide between basic necessities like gas and food and paying the loans, the choice, she finally realized, was easy.

'Chasing' Customers

At World, a normal month begins with about 30 percent of customers late on their payments, former employees recalled. Some customers were habitually late because they relied on Social Security or pension checks that came later in the month. They might get hit with a late fee of $10 to $20, but they were otherwise reliable. Others required active attention.

Phone calls are the first resort, and they begin immediately — sometimes even before the payment is due for customers who were frequently delinquent. When repeated calls to the home or cell phone, often several times a day, don't produce a payment, World's employees start calling the borrower at work. Next come calls to friends and family, or whomever the borrower put down as the seven "references" required as part of the loan application.

"We called the references on a daily basis to the point where they got sick of us," said Simmons, who managed the Pine Mountain, Ga., store.

If the phone calls don't work, the next step is to visit the customer at home: "chasing," in the company lingo. "If somebody hung up on us, we would go chase their house," said Kristin from Texas.

The experience can be intimidating for customers, especially when coupled with threats to seize their possessions, but the former employees said they dreaded it, too. "That was the scariest part," recalled Thacker, a former Marine, who as part of his job at World often found himself driving, in the evening, deep into the Georgia countryside to knock on a borrower's door. He was threatened a number of times, he said, once with a baseball bat.

Visits to the borrower's workplace are also common. The visits and calls at work often continue even after borrowers ask the company to stop, according to complaints from World customers to the Federal Trade Commission. Some borrowers complained the company's harassment risked getting them fired.

ProPublica obtained the FTC complaints for World and several other installment loan companies through a Freedom of Information Act request. They show consistent tactics across the industry: the repeated phone calls, the personal visits.

After she stopped paying, Johnson remembered, World employees called her two to three times a day. One employee threatened to "get some stuff at your house," she said, but she wasn't cowed. "I said, 'You guys can get this stuff if you want it.'" In addition, a World employee knocked on her door at least three times, she said.

The goal of the calls and visits, former employees said, is only partly to prod the customer to make a payment. Frequently, it's also to persuade them to renew the loan.

"That's [World's] favorite phrase: 'Pay and renew, pay and renew, pay and renew,'" Simmons said. "It was drilled into us."

It's a tempting offer: Instead of just scrambling for the money to make that month's payment, the borrower gets some money back. And the renewal pushes the loan's next due date 30 days into the future, buying time.

But the payouts for these renewals are often small, sometimes minuscule. In two of the contracts ProPublica examined, the customer agreed to start the loan all over again in exchange for no money at all. At other times, payouts were as low as $1, even when, as in one instance, the new loan's balance was more than $3,000.

Garnishing Wages

For Sutton, making her monthly payments was always a struggle. She remembered that when she called World to let them know she was going to be late with a payment, they insisted that she come in and renew the loan instead.

As a result, seven months after getting the original $207 loan from World, Sutton wasn't making her final payment. Instead, she was renewing the loan for the second time. Altogether, she had borrowed $336, made $300 in payments, and now owed another $390. She was going backward.

(Erik S. Lesser/EPA for ProPublica)

A summons of garnishment Katrina Sutton received. When World Finance discovered that it could not garnish Sutton’s wages, the company put a hold on her “payroll card,” a kind of debit card provided by her employer. She was left without any money to pay for the gas she needed to get to work. (Erik S. Lesser/EPA for ProPublica)

Not long after that second renewal, Sutton said, Walmart reduced her hours, and there simply wasn't enough money to go around. "I called them at the time to say I didn't have money to pay them," she said. World told her she had to pay.

The phone calls and home visits followed. A World employee visited the Walmart store where she worked three times, she recalled.

World didn't dispute that its employees came to Sutton's workplace, but it said that attempts to contact "any borrower at her place of employment would occur only after attempts to contact the borrower at her residence had failed."

In Georgia, World had another path to force Sutton to pay: suing her.

World files thousands of such suits each year in Georgia and other states, according to a review of court filings, but the company declined to provide precise figures.

Because Sutton had a job, she was a prime target for a suit. Social Security income is off limits, but with a court judgment, a creditor can garnish up to 25 percent of a debtor's wages in Georgia.

"When we got to sue somebody, [World] saw that as the jackpot," Buys said. In her Oklahoma store, collecting the junk people had pledged as collateral was considered useless. Garnishment was a more reliable way for the company to get its money, and any legal fees were the borrower's problem.

World said 11 of the states where it operates permit lenders to "garnish customers' wages for repayment of loans, but the Company does not otherwise generally resort to litigation for collection purposes, and rarely attempts to foreclose on collateral."

The sheriff served Sutton with a summons at Walmart, in front of her co-workers. Sutton responded with a written note to the court, saying she would pay but could only afford $20 per month. A court date was set, and when she appeared, she was greeted by the branch manager who had given her the original loan. The manager demanded Sutton pay $25 every two weeks. She agreed.

For five months, Sutton kept up the payments. Then, because of taxes she had failed to pay years earlier, she said, the IRS seized a portion of her paycheck. Again, she stopped paying World. In response, the company filed to garnish her wages, but World received nothing: Sutton was earning too little for the company to legally get a slice of her pay. After two months, World took another step.

Sutton's wages are paid via a "payroll card," a kind of debit card provided by Walmart. World filed to seize from Sutton's card the $450 it claimed she owed. By that point, she'd made more than $600 in payments to the company.

The immediate result of the action was to freeze Sutton's account, her only source of income. She couldn't gas up her car. As a result, she couldn't drive to work.

Sutton said she called a number for World's corporate office in a panic. "I said, 'You're gonna leave me with no money to live on?'" The World employee said the company had had no choice because Sutton didn't hold up her end of their agreement, Sutton recalled, and then the employee made an offer: If Sutton's available wages in her account hadn't covered her total debt to World after 30 days, the company would unfreeze her account and allow her to start a new payment plan.

Desperate, she gave up trying to deal with the company on her own and went to Georgia Legal Services Program, a nonprofit that represents low-income clients across the state.

"Her case is terribly egregious," said Michael Tafelski, a lawyer with GLSP who specializes in collections cases and represented Sutton. World had overstated the amount Sutton legally owed, he said, and circumvented laws limiting the amount of funds creditors can seize. In effect, the company was garnishing 100 percent of her wages. It's "unlike anything I have ever seen," Tafelski said, "and I have seen a lot of shady collectors."

After Tafelski threatened to sue World, the company beat a quick retreat. It dismissed all open cases against Sutton and declared her obligation satisfied.

In its response to ProPublica, World claimed that Tafelski had bullied the billion-dollar company: "Mr. Tafelski used abusive out of court threats to accomplish an end he knew he could not obtain through legal process."

"It's common practice among lawyers to contact the opposing party to attempt to resolve problems quickly, without filing a lawsuit, especially in emergency cases like this one," Tafelski said.

As for Sutton, she had missed several days of work, but her account was unfrozen, and she was done with World Finance forever.

"If I'd known then what I know now," she said, "I'd never have fooled with them."

From our partners at Marketplace:


Listen to ProPublica's Paul Kiel and Marketplace's Mitchell Hartman discuss their reporting on installment loans:

Consumer ignorance is highly profitable.

This should be a chapter in the book: Pound Foolish

Corrupt financial industry + inept government = vulnerable public.

What I don’t understand about these sorts of cases (and there’s a wide variety to the same basic scam) is where the competition is.  I can understand one or two insanely abusive bottom-feeding companies in an area, they leave an enormous hole in the market for fair-dealing competitors, don’t they?

This is absurd that the states and country allow these interest rates.. These loans are terrible products and everyone should avoid these at all costs (If you made it this far I am sure you wouldn’t of taken them out in the first place.) Absolutely ridiculous.

@John - There lies the $20 Billion question. Who is going to offer reasonable interest rates and less return with such high risk customers?  Though we both imagine that yes, there should be measures in place to back it with collateral and other things. Sometimes you just wonder how corporations can be absolute bottom scum of the earth though…

This is what the government is supposed to protect us from not fabricated things like the WMDs in Iraq, the Vietnam Communist threat, North Korea’s nuclear threat, Global Warming, nor Banks going out of business. These places need to be out of business.

terence francis

May 13, 2013, 4:11 p.m.

Still holding out hope for the mythical “American Dream” ? Try to find a way to move to Denmark et al

Please note, early in the article it states, that the industry worked with Republicans to exclude controls, on these types of businesses from the 2009 regulations (Dodd-Frank I assume.) That doesn’t surprise me.  I’m not sying the Dems have never done something like this, but most times when I read things like this, Republicans always vote to protect business, not the consumer.

Why does the reporter quote annual interest rates, when these are not annual loans? Very confusing.

If this is accurate, why don’t we quote nightly hotel rooms rates on an annual rent basis?

Buddy Cole:

If you had read the article more closely, you’d have known that the installment loans offered by World Finance and their marketplace peers are—at least in many instances—12 month loans.

Buddy Cole:

It is no different than walking into a pawn shop to get a loan against your TV.  The store, if you read the ticket has an APR, usually 240%.  The APR is used to calculate how much your monthly payment is based on a 12 month term, same as a pawn!  That’s really all these loans are is pawns. They take collateral for a high rate loan, but these guys don’t want your junk, they just want you to renew your “pawn ticket!’ The longer your stuff is in hawk, the more money the pawn shop makes!

The difference between these lenders and the Mafia’s loan sharks?  Ownership of politicians.

Ever wonder how different America would be if the mob had had the inspiration of buying Representatives and Senators prior to the Kennedy Administration?

Lefties must decide whether they want a patriarchal government or not.

Should stupid or weak people be prevented from engaging in certain acts, such as signing a very high interest loan agreement? Who decides if they are stupid or weak? Who decides if a very high interest loan agreement is a good or bad thing for them at the moment in question?

I know! We’ll get a government panel and a team of dedicated, selfless bureaucrats to help! Ha, ha, ha, ha, ha….

This article is laughable. If people are this stupid, it’s hard to feel sorry. As the story reads, she also owed IRS, I suspect this is just what she does as an irresponsible member of society. Then she will declare bankruptcy and leave us all on the hook. People are always looking for a quick fix or “free money.” Why didnt she just pay the payments and not refinance just to get $44, please. If this company didnt exist, she would go to a pawn shop, loan shark or whatever.

Excellent reporting. Sadly there is a deeper part of this story. People who are trying to work for a living and keep getting knocked down. It is very sad when a person needing car repairs; to get to work, cannot write off the repairs or receive a tax credit. Yet if I buy a motorhome or second home I get a tax writeoff. And the person who already has a home, can buy up homes and get tax writeoff for interest and depreciation, making the poorest people in America their tenants and the poorest people never build any equity. Yes, this is the greatest country in the world but it has evolved to where human capital is nothing more than a slot above slave labor and viewed by management and governement as an incidental part of making those overly glorified dividends and capital gains for investors.

Fred, are you suggesting that only people who vote Democrat could possibly care about businesses not abusing customers?  I’m not sure how that’s a partisan thing, rather than basic common sense.

I mean, seriously, if you manufacture cars, you don’t make one that explodes and kills the driver.  You avoid that feature not (entirely) because there’s some law or certification step that prohibits it, but because it’s a short-sighted and pointless business model.

Why is it that, when money’s involved, people come out of the woodwork to defend what amounts to fraud, extortion, stalking, harassment, usury, and dozens of other crimes as the only possible alternative to dictatorial oppression?  I ask because the same people defending that behavior seem to be perfectly at peace with my mother and sister getting groped at the airport and everybody’s e-mails being archived by the government to protect us from some hypothetical terrorists without any suggestion of nanny statism.

Christopher Tracy

May 14, 2013, 10:26 a.m.

Well done article.  I found the last part - about World being bullied by an attorney to be funny.  World cannot afford competent attorneys?  Or is their case so weak no attorney would dare take that stand? 

Now that we know their weakness is in litigation, perhaps others will use that to their advantage.  Let’s hope so.

First off are they licensed to operate in the state? This is so illegal i can’t believe they are getting away with any of these practices! The Consumer Financial Protection Bureau waits some times to get a certain number of complaints to act. But i can’t see them waiting in this situation. We deal with this where the banks say even if you close your account the payday lenders can hit that closed account and take money out and over draft the account. I have had customers with this problem and called the regulators of Chase bank and Bank of America and told them what was going on and they straighten it out within 24 hours. We are getting people out of their loans all the time by working with the regulators and different government offices.

Elias Remington

May 14, 2013, 10:43 a.m.

Slavery never ended , the chains just took another form , the debit card , the loan , the Taxes , the utility bills ,the bank engineered hardships imposed on the people , the dollar you earn today is worthless when you retire , werever people wake up & ask for change is another thing , the illusion imposed on them is appaling , no one dares to raise a finger against the beast , all bow to the golden calf gods not knowing they are mere slaves in servitude .


Am I the only one to observe that the basis of this problem might not just be predatory loan practices but the low wages paid to working people to start with?

The nub of the problem is right in the lede: “She’d been careful to wait until her $270 paycheck from Walmart had hit her account.”

A $270 paycheck?

Unless she’s only working a couple of hours a day, that’s absolutely pitiful.

And dispicable on the part of Walmart.

Gerry Frederics

May 14, 2013, 12:13 p.m.

According to the photograph, this shapeless grease-ball is REAL trailer trash. When I left the USArmy way back when I worked for a Finance Company as a collector & can tell you, these low-lifes are born credit criminals. It is not only that their credit is bad, their life is a mess - EVERYTHING is bad; if you were to get a look at her kitchen, you would doubtlessly barf - I KNOW having been inside countless homes of these humanoids. Just look at this bag of wastematerial - she was stupid enough to take out a student loan to get an AA degree & then qualified only as a part-time cashier at Walmart. If it weren´t so tragic, it would be hilarous. Gerry Frederics

I’m at a loss….installment loans weren’t included in capping exorbitant rates.  Aren’t almost all loans ‘installment’ loans in that you have a set period of payments to make on a regular time basis…I guess you can flex on credit cards…

This article is a clarion call for consumers to beware of easy credit. 

It’s almost as dangerous as all of the loans World Savings made (Herb and Marion Sandler’s loan origination ARM —pun intended) in the 80’s and 90’s before being sold off to Wachovia.

Nice job Herb and Marion.  Turn this article around on yourselves to see how many victims tumble out of your pockets hundreds of millions of dollars in bad debt.

“Allah has permitted trade and has forbidden interest”  (Quran 2:275)

” O you who have believed, do not consume usury, doubled and multiplied, but fear Allah that you may be successful.”  (Quran 3:130)

According to Prophet Mohammad Interest (Usury) is considered amongst the Seven Heinous Sins, namely:

  Believing in gods other than One True God.
  Unlawfully taking orphans’ money.
  Fleeing the battlefield.
  Accusing chaste, pious women.

Paula Roberts

May 14, 2013, 9:32 p.m.

I’m not against Algebra or even Calc/Trig but how about just basic Financial management class in Junior High???

Steve, that’s a big part of it, but the article did mention she worked part time, and $270 could easily be just shy of forty bucks an hour (before taxes).  It also mentions that she’s a cashier, I believe, so that’s better than minimum wage for a job most stores are trying to phase out with the check-yourself-out lanes.

It’s not great, but it’s hard to imagine any company doing much better.  I mean, in theory, you could raise the minimum wage, but at that point, the jobs probably vanish to self-service scanners.

Heck, they’re better than half of Silicon Valley, minting serial billionaires (on abusing privacy) while crying poverty and decrying the lack of STEM graduates when half our graduates don’t get a job out of school, so we need to indenture some H1Bs (who take lower salaries and don’t leave for another job for fear of deportation) pronto.

Apple’s profit margin is higher than that of World Acceptance, and yet, there is no law restricting how much they can charge for an iphone. What is it about the lending businesses that brings such opprobrium?

The troubles of the people mentioned in the article are very sad, but one could write a similar piece on the troubles some people get into because of wanting to own the new iphone, new car, or new house.

To “protect the customers” we could regulate how much all industries can charge, but we’d be the worse for it because (1) we know that capitalism works like nothing else that’s ever been tried, and it works for society as a whole - in America, even the average poor family of today lives better than the average rich family of 100 years ago, and (2) there’s a strong moral case for allowing people the freedom to make their economic decisions, however silly.

On the second point: Those who want to regulate the profits of the loan industry, or of any other, are in effect saying “we don’t want people to be free to choose expensive products. We know what’s best for them, and it’s not enough that we can express our views - we want to impose them by law”. I think that’s a pretty unethical position.

An unrelated comment: please read Omar’s comment above - it’s hilarious.

@ Gerry Frederic’s it is sad that we still have idiots like you in society because everyone can’t live as you do and further more are you god? Didn’t think so, so stop being so judgmental how do you know what this young lady’s life been like u don’t so shut up also she probably has been working part time at Walmart and is going to school to make a better life for herself so if anyone is trash it is you just saying with that being said my heart goes out to all the “victims” in this story!

@oped you need to read the story more close and you will see why she renewed they talked her into it they scammed her stupid to all the negative speaking idiots on this post I just guess all of you are just perfect huh?? It is crazy how much people attack the victims of such businesses that feed on consumers who never dealt with these type of situations and have of you wouldn’t even be able to walk a mile in a low income persons shoes because u were born with a silver spoon in your mouth but the question is what would y’all do if you lost all your money or family and you was trying to work part time and go to school and needed money to get your car fixed and you did the same as she had and the company screwed you?????

Why is this a question of Republicans or Democrats.  Don’t you people realize you are being played for fools.  The entire government is corrupt while we idiots argue about which party is responsible.

Never have I seen such insanity.

Ddavis - I agree, this government is supposed to protect its citizens, not those with the highest IQ but the weakest among us as well.  The government got rid of the mob for what?  A legal mafia?  Please.

All those blaming the victim should be ashamed.

It’s amazing to read the numerous comments that boil down to “stupid people get what they deserve.”  We apparently have many near-perfect folks reading this site, who have never EVER made a bad decision.  It’s quite remarkable, if one stops to consider it.  I guess those folks think that the folks running multi-million-dollar Ponzi schemes should never be punished, either…or that the folks who rated junk bonds AAA before the housing bubble burst were perfectly right to do so…

The attraction of payday/installment loans is simple.  Our financial/banking/credit sector has made it incredibly difficult to repair damaged credit; screw up once, and doors start slamming shut.  We’d all like to think that most banks understand the notion that everyone makes mistakes, and they may understand it - but that doesn’t mean that they’ll help you out with even a small loan.

I don’t have a problem with installment/payday loans until they start charging obscene interest rates like these.  There’s nothing wrong with saying, “Yeah, there are stupid people out there, but you aren’t allowed to take advantage of them like that.”

She should have saved the money she spent on community college. If you are this far gone mentally that you take a lender’s word instead of reading the fine print, roll over loans so you can pick up pennies in your hand now and in general are such a financial illiterate that you are punked for years like this there is very little anyone can do for you.

How people like this manage to figure out where the gas cap is never ceases to amaze me.

My nomination for the most provincial comment, ever:  “in America, even the average poor family of today lives better than the average rich family of 100 years ago”.

Anybody who thinks that has never seen the Hearst, Vanderbilt, etc. etc. etc. mansions - to include their servants’ quarters.


The people you refer to (Hearst and Vanderbilt) were harldy “average rich”, which are the words I used. But lets run with the Comodore, since you mentioned him. He was the richest man of his day, and if he lived today and owned the same proportion of GDP he’d be worth about $150 billion - more than Gates and Buffett combined).

Yes, he had large and nice houses, and lots of servants, but:
-His children had a much lower chance of making it into adulthood than Katrina’s (the woman whose troubles this article mentions).
-He had no way to know what was going on in the other side of the world until weeks later; Katrina has a TV.
-Even by travelling to the best universities his children couldn’t ever hope to learn, on any field, what Katrina’s children can learn today, at home, with the click of a button. And he couldn’t easily argue a point with a friendly Mexican several thousand miles away, which is what you are doing right now.
-He didn’t have a phone to hear the voice of his loved ones; Katrina probably does.
-He could not spend an evening at home listening to Bach played by the world’s best orchestra, or watching the best actors perform; Katrina has much better entertainment.
-He probably never even dreamt of the possibility of eating Thai food. 
-Katrina has a car; he had a comparatively slow, rattling carriage, in with he tediously made his way every year to The Breakers - his large non-air-conditioned mansion in Newport where he had no lightbulbs, no refrigerator, no 911 to call if his heart started beating weirdly, no Amazon to order the last Scandinavian thriller from, and saddest of all, no Coca-Cola.

So yeah, the Comodore lived better than Katrina, if one takes quality of life to depend on the number of square feet and of genuflecting servants in one’s living room. But wouldn’t such a position be a bit, as you say, provincial?

@juan:  Although I sense that I am pursuing a lost cause, your defense of your statement that “even the average poor family of today lives better than the average rich family of 100 years ago” appears to depend upon the average poor family of today having wealth sufficient to afford an Ivy League education, cable, car payments, and a quality home stereo system to include a record collection varied enough to contain the classical composers.

I don’t know where you live, but the only place I can think of where the “average poor” has a shot at meeting your baseline is oil-rich Qatar.

(I left out having the wealth required to dine out whenever the whim strikes them; I was afraid the new definition of “average poor” might include having the wherewithal to fly into Khorat for dinner.)

@ibsteve2u: because you mentioned C. Vanderbilt, I compared his quality of life to that of the woman in the article, who many in this thread seem to think, with reason, is not one of America’s rich and fortunate. And I think I showed she lives better, which is more than I needed to do to prove my point, since the Comodore wasn’t an average rich American, but the second richest ever as a % of GDP.

If you don’t like my comparison, why don’t you try one of your own that you think is fair? It might change your mind, or mine. Remember: it’s quality of life of an average rich family 100 yrs ago vs. quality of life of an average poor family today.

The point I wanted to make in my original comment was this: Capitalism works because it makes everyone richer over time, and that includes the poor. 

You ask where I live: in Mexico. Here’s an experiment that history provides: in the middle of the 19th century half of my country went to become the southwest of yours. Guess where there is less poverty now?

The American capitalist system works - you might not see it because you live in it. But living in Mexico, I’m well acquainted with poverty. And yes, I have also seen firsthand how the poor of the US live, and also the poor of South America, Asia and the countries that used to be on the East side of the Iron Curtain. Believe me, the poor have it much better in the US.

I am proud of America, even if it’s not my country - it’s found an economic system that unleashes human potential and allows everyone to live better over time, and at the same time is a beacon of liberal and enlightenment values to the rest of the world.

I wish my country was more like yours, and I hope you guys see the tremendous success of your predecessors for what it was, and try to keep it up.

Great article. Another case of predatory lending period. This company is selling high interest short-term loan products to poor, uneducated consumers.  This debt quickly spirals out-of-control and locks consumers into a cycle of loans they can’t recover from.  Predatory lending was at the heart of the subprime mess and it seems the practice lives on. 

Companies like World Financial will never stop peddling these products, as long there is a profit to be made.  They will continue to fight and resist every attempt at regulation.  These companies give nothing back to society (save the shareholders and top executives who collect the windfall).

For fun I went ahead and looked at the company’s mission statement and made some of my own [additions].

World Acceptance Corp’s Mission Statement:

1.  To be of service to our customers. [By taking advantage of uneducated, poor consumers at the bottom of America’s wealth ladder]
2.  To provide our employees a good work place with fair compensation, good benefits and
advancement opportunities. [Probably true if you’re at the top, but the branch manager hated her job and it’s conceivable that anyone customer-facing, and with any degree of moral conviction, feels the same way. It my job was to take advantage of people in dire situations, I’d hate it too.]

3.  To be sound. “In order to be sound, we must be thorough and complete in all that we do.” [I’m CERTAIN they are sound. This is a well-oiled and tuned machine. They know how to push these products, lock consumers in and how to scare consumers with threats of lawsuits and repossessions.]

4.  To be profitable. [The goal of the any company, I’m surprised they didn’t list this one first]

5.  To be large. [Setup more branches, offer more loans, get bigger, profit, profit, profit]

This article is part of an ongoing investigation:
Debt Inc.

Debt Inc.: Lending and Collecting in America

How lenders tempt consumers with high-cost credit products that go far beyond payday loans.

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