Small payday loans are touted as quick, short-term access to money, but people like Elliott Clark of Kansas City, Missouri, call them "debt traps."
A retired and disabled Marine, Clark still has a hard time talking about the more than 5 years in which he says he struggled to pay $50,000 in interest which began with $2,500 of these loans, sometimes called "cash advances" or "check loans."
"It was hard for me to talk about it without breaking down in tears," Clark told ABC News. "If you're a man you take care of your family. If I had another choice, I would have taken it. I wouldn't have gotten in that situation at that time."
Clark's road to the payday loans began in 2003, when his wife slipped on ice and broke her ankle, which required surgery to restructure it. His wife, a retail employee, was unable to work for several months, Clark said, and was ineligible for benefits from her employer. With two daughters to help support through college, Clark couldn't pay his wife's medical bills, which he said totaled $26,000. He turned to his family and friends, but they didn't have the money to lend him.
"I tried banks and credit unions. My credit was 'fair,' but it wasn't enough to get a large sum of money to pay the money," he said, noting his credit score of 610. A credit score of more than 750 is typically described as "excellent."
Clark said he eventually took out five $500 loans from local storefront lenders, and he paid interest every two weeks. Every two weeks, $475 in interest was due ($95 from each loan) and he would often take out new loans to cover the old ones.
Eventually, through a range of jobs such as working in pest control and as a corrections officer, he was able to pay off the debt.
"I did this constantly for five and a half years. It took its toll," he said. "We ended up losing our home. We lost our car. We moved finally in 2010 and now we're paying rent."
Last month, Consumer Financial Protection Bureau (CFPB) director Richard Cordray said the agency is continuing "to prepare new regulations" in the online payday loan market. On June 2, the CFPB is hosting a hearing in Kansas City, Missouri, about small dollar lending.
Some payday lenders are said to charge as much as 700 percent, according to the Kansas City Star.
Now that Clark has paid off the loans, he is an activist who calls for a cap on the interest rate for payday loans, as first reported in the Kansas City Star. He calls for a cap of 36 percent.
A national organization for payday lenders, the Community Financial Services Association of America, argues against a cap on payday loan interest rates.
Amy Cantu, spokeswoman for the association, points out that the Dodd-Frank Wall Street Reform and Consumer Protection Act precludes the CFPB from setting a rate cap on payday loans.
She argues that price fixing "almost always results in reduced consumers access to any product." In states that have instituted a 36 percent rate cap on payday and other short-term loans, lenders were "forced to close hundreds of stores, costing thousands of employees their jobs and leaving consumers with fewer credit options," Cantu said.
"In the absence of regulated, licensed storefront lenders, many consumers turn to unregulated, unlicensed lenders that operate online," she said. "If you eliminate payday loans, you still have to answer the question, 'Where will consumers go with their short-term credit needs?' Those needs don't just go away."
Clark argues for an interest rate cap for online and storefront payday lenders.
"The payday loan is a debt trap," Clark told ABC News. "It's a spiraling cycle that takes you down to nothing, like I lost everything."
Missouri Man Paid $50,000 in Interest After Taking $2,500 in Payday Loans