March 18, 2007
BILL GRAVES
The Oregonian
Nick Cavinta was spent -- out of luck, out of favors, out of money.
The metalworker had gambled away his paychecks in casino blackjack games for two years -- since a divorce that left him depressed and lonely. He’d tapped out friends, children, credit cards.
On this Saturday morning in 2001, after gambling all night, he slouched through the New Phoenix Casino, a cardroom in La Center, Wash., figuring he was finished. Then, a friend told him about a way he could keep gambling.
An hour later, Cavinta was at a payday lending store in Portland. He borrowed $200 at the cost of $40 in interest -- for a two-week loan, that’s an annual rate of 521 percent. Then he headed back to the New Phoenix.
Cavinta, now 53, estimates he took out 200 more payday loans before getting help for his gambling addiction a year ago.
Counselors say problem gamblers commonly turn to payday lenders, often after they’ve exhausted other sources of money.
Payday lenders offer gamblers ready cash with no questions. And they’re convenient. With about 360 payday stores in Oregon, more than the number of McDonald’s restaurants or Starbucks coffee shops, most gamblers don’t have to go far to find money.
If payday lenders didn’t exist, problem gamblers "would hit bottom more quickly," said Marcia Mattoso, a gambling counselor and outreach coordinator for Cascadia Behavioral Healthcare, a Portland nonprofit that operates the state’s largest gambling counseling service. Payday loans "make gamblers’ finances even worse than they were in the first place."
Video lottery, the game of choice for most problem gamblers, sends broke players to payday lenders who in turn give gamblers more money to burn on video lottery.
During the past seven years, the number of payday loans in Oregon nearly tripled, to nearly 841,000 a year; annual video lottery revenue increased by 82 percent, to $733 million; and the number of gamblers turning to counselors for help doubled, to 1,714.
Only a fraction of problem and pathological gamblers -- estimated to number about 74,000 in Oregon -- seek help, though the state sets aside lottery revenue to offer gambling therapy free.
A common practice
Counselors’ estimates on the proportion of addicted gamblers who turn to payday loans range from 10 percent to more than half.
"If you’re going to make it really easy for desperate people to dig themselves into a deeper hole, they are going to do that," said Josh White, clinical supervisor for the Oregon Health & Science University Behavioral Health Clinic in Portland. White estimates that more than half of the 80 gambling addicts served in his clinic have borrowed from payday lenders.
"It is sad and painful to see," he said. "Payday lending is a way to hide gambling from family. . . . (Gamblers) tell themselves, ’I’m going to get a loan, win big, pay off the loan, and have some money left over.’ That is the thinking error."
Olivia, a 38-year-old Portland woman, said she borrowed $5,000 from 13 payday lenders in the course of three days, and then gambled it all away. She didn’t care about high interest rates when she borrowed the money, she said.
"I wasn’t even mentally present when I’d get a payday loan," she said. "I was in a gambling haze. You are not rational. . . . To me, it is even more exciting when you are losing. You are chasing your losses."
She’s hounded by a dozen or more calls a day from payday lenders trying to get back the money she owes them, she said. Lenders also call her mother and friends whom she listed as references when borrowing.
Olivia was among six addicted gamblers and the husband of a seventh interviewed by The Oregonian. The gamblers, now in treatment, all had become indebted to payday lenders for gaming cash. Only Cavinta allowed his name to be used. The others asked for anonymity because they were embarrassed by their gambling problems or feared publicity could jeopardize their jobs. But they all wanted to warn that turning to payday lenders for gambling is a bad bet.
"It is such a trap," Olivia said. "They are so expensive."
Lending near gambling
In a strip mall on the corner of Division Street and 162nd Avenue in Southeast Portland, a small group of gamblers try their luck Wednesday morning on six video lottery machines set up in Dotty’s, part of a chain of delicatessens that operate like small casinos.
Five other people sit at tables, smoking cigarettes while they wait for a terminal. Next door, signs in the windows of Check ’n Go, a payday lender where Cavinta took out his first loan, offer loans of as much as $1,000.
Several problem gamblers said they were struck by how conveniently close payday lenders were to their favorite video lottery sites. Lawmakers anticipated that letting payday lenders too close to gambling and drinking could mean trouble. The law states lenders cannot operate "where liquor or lottery tickets are sold or where gambling devices are located."
The state Department of Consumer and Business Services interprets that to mean payday lenders and video lottery machines cannot be in the same store or in two stores connected by a common door, said Charles Donald, a supervising examiner for the department.
Still, Oregon payday lenders can hardly escape being close to gamblers in a state running 10,747 video lottery machines.
Lenders do not seek gamblers, says Luanne Stoltz, a Portland payday store owner and vice president of the Community Financial Services Association, which represents payday lenders in Oregon. Payday stores choose locations based on high visibility, easy parking and good traffic, she said, not on whether video lottery or casinos are nearby.
"As a payday lender, I would not pursue problem gamblers because I want people to pay," she said. "I would not say people who go to Dotty’s are a target audience of mine."
Payday lenders would not know whether a borrower sought money to gamble because they don’t ask people why they want money, Stoltz said. That is one of the appeals of payday loans -- no questions, no credit checks.
However, the Community Financial Services Association of America, a trade group representing 60 percent of payday lenders, said last month that its members would ban advertising loans for frivolous purposes such as gambling, entertainment or vacations. The group is taking steps to police itself because Congress and many state legislatures, including Oregon’s, have tightened regulations on the short-term loan industry.
Last April, the Oregon Legislature passed a law that limits payday loan fees to $10 per $100 borrowed for the first loan, and no more than 36 percent annual interest on extensions or rollovers. Payday lenders say the law will put them out of business when it takes effect July 1.
They now typically charge about $20 per $100 borrowed for advances that average about two weeks, a 521 percent annual interest rate. If a borrower cannot pay the loan back after two weeks, lenders roll it over for two more weeks, charging another $20 per $100. They can roll it over three times, which would cost a total of $540 for a $300 eight-week loan.
Deeper debts
Gambling addicts say payday loans make it easy to sink deeper into debt and to hide their gambling from family.
Chris, a 35-year-old who entered therapy two months ago, said he threw away hundreds of thousands of dollars playing video lottery all of his adult life. In the past few years, after maxing out his credit cards, he turned to payday lenders, sometimes juggling four loans at once, to keep gambling. A Lake Oswego woman addicted to video lottery said she once carried 21 payday loans at once.
Greg, 42, who lives near Portland, said his wife gambled away more than $300,000 during the past decade. She took out at least 50 payday loans that he did not know about. They are both getting therapy and paying off the last of the loans, he said.
"As a spouse, I don’t get a choice on whether she gets a loan," he said. "Yet, as a married person, I’m liable."
During more than four years of intense gambling, often with payday loan money, Cavinta lost nearly all he owned. He was evicted from his apartment. For three months, he lived out of his car, parked in his sister’s driveway. Then he moved in with his son for a year.
He was born and raised in the Philippines, where gambling is prevalent, but he never gambled much there. He moved to the United States in 1971, joined the U.S. Army, served in Vietnam, and then built his life in Portland. Only after his divorce in 1999 did he get swallowed by gambling.
In 2000, he began dating Julianne Bautista, a Portland woman he had met years earlier. They eventually moved in together in Southeast Portland. Cavinta kept gambling, usually in secret.
The couple bought a townhouse in Vancouver in 2005, and made plans to marry. By then, Bautista knew Cavinta was compulsive about gambling. But it wasn’t until mid-January last year, a month before their wedding, that she realized how serious his addiction had become. During a Sunday evening party she hosted for friends, Cavinta slipped away to the New Phoenix Casino.
He didn’t return for six days. He gambled night and day.
"It is like a high," he says. "You are in the zone. That is your comfort zone. Once you have the chips, you have the action."
He emptied their checking account, then all $18,000 in their savings account. He went to Spirit Mountain Casino in Grand Ronde and wrote checks to gamble $15,000 more.
"I went crazy," he said. "I panicked because I lost the money. I lost it all."
When he returned, Bautista postponed the wedding and persuaded Cavinta to join her in therapy. He has not gambled since, and on Oct. 21, they married.
The Cavintas said it will take them years to dig out of debt -- debt made deeper by payday loans.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.