|
| Wednesday, December 27, 2006 |
|
 USAToday's article: Some consumers run into big problems with auto title lending reports that the alternative lending crowd has found a new way to fleece America's poor.
Auto title lending is part of a huge expansion of the alternative financial system since the 1990s, including payday loans, high-cost mortgage products and check-cashing firms. The industry has boomed by opening outlets in areas not served by banks, promising loans regardless of credit history and providing quick cash, including Internet lending and disbursements via prepaid ATM cards for clients without bank accounts. The article spells out how much these quick-cash loans really end up costing the folks who sign up for them: Alicia and Clinton Lummus of Conyers, Ga., took out a $525 loan in March when injuries forced both to stop working. After paying $132 a month for eight months, Alicia Lummus, 30, told her lender she couldn't keep up and asked for an extension.
The lender repossessed the truck. Not only that, but the person who came for the truck drove it into a ditch and told the Lummuses they'd never get it back unless they helped pull it out, Lummus says. They did but are still trying to recover the $14,000 auto.
"I'd … be scared ever to do it again," says Lummus, who chose her lender because it was close to her home and didn't require a credit check. Pretty scary when you think of it - they take out a loan for $525 - pay back $1,056 ($132 X 8) - double the original loan - and still lose their $14,000 truck?!? - and it is legal. It is a hard way to learn how not to handle your finances. |
| posted by Boston Gal @ 9:58 AM *
* Subscribe to Boston Gal's Open Wallet |
Links to this post:
|
| 2 Comments: |
-
Assuming the contract they signed was relatively clear, I extend no sympathy to them. If you don't take the time to understand what you're signing, especially on financial items, then I hope that you end up screwed.
-
"Relatively clear" is kind of hard to define. Perhaps the person did take the time, but it was still beyond their understanding. It wouldn't be hard to believe with all the terminology in legal contracts.
That said, I know in my Prosper lending that certain states have limits for the percentages that people can lend/borrow at. I think that Massachusetts is something around a 30% APR (just a guesstimate). With the car value added in, it's around 15,000%.
I'd say it shouldn't be entirely up to the consumer. Anyone will to take advantage of another person at this outrageous rate is just as bad as stealing. They basically conned another person out of more than $10,000. Somehow that's legal, but it would be illegal for me to steal a purse with $50 in it? It just doesn't make sense.
|
| |
| << Home |
| |
|
|
|
|
Assuming the contract they signed was relatively clear, I extend no sympathy to them. If you don't take the time to understand what you're signing, especially on financial items, then I hope that you end up screwed.