That was the case even though installment lenders have a comparable market size and often charge annual rates of more than 200 percent, ProPublica reporter Paul Kiel says.
Paul points out in part one of the series that the installment lending industry has “survived” laws that try to limit these types of loans. For instance, he writes:
Borrower Katrina “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 [Finance] 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.”
Paul’s story uses borrowers and employees to tell the story. He follows Ms. Sutton’s loan chronologically. Using another borrower’s story, he illustrates how companies earn profits on the loans. He writes that borrower Emma Johnson received her first loan from lender World Finance in 1993 and has taken out 48 loans, which includes new loans and refinanced loans.
“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,” he writes.
Paul says reporters can localize the story by finding installment lenders in their areas, particularly near military bases, which is the focus of his second story.
He says to find garnishment lawyers to explain details because state and federal laws differ. To find sources, contact legal service lawyers and bankruptcy attorneys. He says reporters should always ask borrowers if they have multiple loans, which was the case for Ms. Johnson.
Like most reporters know, finding people may not be that easy. He estimates he approached about 50 people and found six to talk with him.