We’ll never advise that anyone take out a payday or installment loan with an interest rate of 240%, but if you do find yourself taking out one of these ridiculously high-interest loans, know that defaulting on the payments can land you in the courthouse, where you could end up buried beneath a mountain of debt from which you’ll never dig out.

ProPublica has the story of a St. Louis woman who took out a 26-month installment loan of $1,000 back in 2008 from a company called AmeriCash. She was supposed to pay back the loan in payments of around $67/month, and would have paid a total of $1,737 by the time she was done — significantly more than the original value of the loan.

But as happens, she was not able to keep up her payments and went into default on the loan. So AmeriCash brought a lawsuit against her and she signed a consent agreement to pay down the owed debt… plus $2,383 in accrued interest… plus attorney fees. In total, she now owed $4,155. The consent judgement states that she would pay $100/month, but the new interest would only be 9%, rather than the 240% APR she’d originally agreed to.

So we know how $1,000 ballooned to $4,155, but how in the world did that become $40,000?

Apparently, AmeriCash continued to keep charging that 240% interest. The borrower had no idea, as the payments were garnished from her paycheck and Missouri law did not require the lender to provide her with statements of what she owed.

And so even though she was paying down the debt — and has since paid more than $5,300 back to AmeriCash, the interest was continuing to grow and grow over the course of nearly five years. It wasn’t until a reporter pointed out to the borrower that her debt had grown to $40,000 that she learned of her situation.

After ProPublica contacted AmeriCash about the borrower’s case, it decided to tell the court that her debt was now satisfied.

The question is whether the lender had the right to charge the borrower that high interest rate. Missouri law allows lenders to seek that rate when they win a judgement against a borrower, but in this case, the borrower had a consent judgement with only a 9% interest rate.

“I would believe you’re bound by the agreement you made in court,” said one Missouri judge.

Because he can’t compel a lender to lower interest rates on borrowers they sue, he says tries to get lenders to work with sued borrowers to come up with a payment plan that doesn’t leave the borrower in the shackles of debt for the rest of his or her life.

“It’s really an indentured servitude,” explains the judge. “I just don’t see how these people can get out from underneath [these debts].”

ProPublica also tells of another St. Louis who borrowed $100 from a Loan Express store in 2006. When she fell behind on payments, the lender didn’t sue right away. Instead, it waited more than two years to sue, all while the debt was accruing interest. In the end, it received a judgement of $913 on a $100 loan and began garnishing the borrowers’ wages.

Much like the AmeriCash case, Loan Express continued charging high interest even as it was garnishing wages. When she’d paid $3,600 back, she asked the lawyer — who just also happens to represent AmeriCash — if she would ever be done paying off a $100 loan.

“And he said, ‘Maybe, maybe not,'” she recalls. She has since sued, alleging that the lender deliberately delayed filing a lawsuit in order to accrue interest on what had started as a relatively small debt.

The owner of Loan Express tells ProPublica that his company waited to sue because the borrower’s wages were already being garnished by another creditor, and that he gave her multiple opportunities to avoid being sued.

He also said that if the borrower had asked Loan Express to stop garnishing her wages after taking in more than 35 times the amount of the original loan, but added, “legally, I don’t have to.”

Check the entire, fascinating piece on ProPublica.org.

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