Former employee explains how payday loans really work

After graduating college, Matthew Kliot thought he'd take a stab at the consumer loan business.

“It seemed like a fairly easy, clean job that I could do," he said.

But looks can be deceiving. Kilot started as a cashier and moved up to store manager. He told me he quickly recognized pros and the long list of cons.

“When I could help somebody out really good, and I can make sure they get their car fixed... but as I started working, I realize it's based on repeat customers."

Rates vary from 15 to 20 percent at first. But here’s how it works: for someone coming in for a $100 loan, let's say that person is charged 15 percent, so they must pay back $115 usually come the next paycheck, sounds simple, right?

“On the surface, everything seems great, and it's just 15 percent," Kilot said.

But the problem, most don't or won't have enough money in their next paycheck or the one after that to repay that loan.

So the charges keep piling up, and in some cases. Critics say it creates a never-ending cycle.

“So over the course of 26 loans in a year, you've paid 391 dollars, to borrow the same 100 dollars, 26 times...that's where the profit is," Kilot said.

Talking to Patrick Crowley, Spokesman for the Ohio Consumer Lenders Association over the phone today who represents payday loaners in Ohio, he told me he believes the rates are fair and there's no such thing as customers getting trapped in the cycle.

"I don't think it's a never ending cycle. There's a lot of misconception that people get trapped, or somehow they fall into this, but they want and understand and use the product," he said.

Kilot explained to News 5; that mindset is something that never sat well with him.

“Nobody was rooting for anybody to have to come back to us... you think, what am I doing to myself, why am I doing this to other people," Kilot said.

And he was there when the interest rates weren't even half as much as the ones consumers pay now, which is as high as 591 percent.

“And that's the thing, these people are stuck in a rock in a hard place, and their only option is to take out an extreme loan," Kilot expressed.

Kleot said that’s why he decided to leave.

“I was sick of the business honestly.... for as many people as I was helping, I was hurting a lot more... and it just hurts your soul after a while."

He said he does use payday loan services every once in a while if he needs it, BUT because he knows how it works... it's only a one-time use, and he pays it in full before or on the deadline.

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