Holy Predatory Lending Batman!!

So my son was sick today and I’m home watching him so of course I get to see all the mid-day commercials on TV for every local law firm and diet pill.
Then my eye is caught by none other than Gary Coleman pitching instant loans for a place called CASHCALL.COM. I guess they figure the unemployed shlub who isn’t out hitting the pavement and has a stack of bills piling up is sitting at home watching tv mid-day.
My curiosity gets the best of me and I freeze the “small print” frame at the end of the ad:
Typical loan on $2,600 has an APR of 99.25%. 42 monthly payments of $216.55.

Holy crap!! 99.25% APR!?! Is that even legal? All said and done you will be paying back $9095.10 for a loan of $2,600. Oh yeah, there is also a $75 origination fee.
Jeepers Cripes! Talk about preying on the down trodden.

Also in the fine print is the fact that Bank of Delaware is issuing these notes. That is probably how they are bypassing the state usary laws since banks with federal charters can now apparently get around these. Scum reaches a new level.

Alright, I’m going to play devil’s advocate, here.

Are these loans backed by any sort of collateral at all? No, they are completely unsecured. They are the equivalent of junk bonds. The people that get these kinds of loans do so for a reason - because the can’t get conventional loans. And why is that? Because the have poor credit scores. And why is that? Because they don’t pay their bills!

The default rate on loans of this type are enormous. These astronomical interest rates are charged to make up for the people who don’t pay them back. Not that the company is not making money on the deal - they wouldn’t be in business otherwise.

And, for the record, I do think that nearly 100% APR interest is insane. Only someone truly desperate or ignorant would go for this, but that’s kind of the point. The desperate and ignorant are the most likely not to pay them back.

But, but… when Gary Coleman needs money, he goes to Cashcall.com! If Gary Coleman does it, it can’t be that bad*!

*with the minor difference that Gary Coleman gets money from them by doing lame commercial spots for which they write him a fat check that he never has to pay back. YMMV.

I’d be curious as to how much Gary Coleman gets for a 15 second endorsement.

I took a CashCall loan back in 2003.

My marriage had recently ended, leaving my personal finances in ruins. I had to move, in a hurry. I had no savings, and no people I could borrow the $1000+ for moving.

At the time, CashCall offering either $5000, or $10,000. I called, at arranged for the $5000.

At the end of my call the last thing they tell me before authorizing the loan and getting my online signature was my 59% interest rate. About 2 years later, I had to change my due date. I called them, and they said “no problem”.

However, changing my due date made it so that my payments ($253 a month, always made, like clockwork) had suddenly started covering only the interest. So for about 2 years, I made payments, and when I finally got a BANK loan to pay it off, I owed the exact amount I had borrowed… $5000. I paid (not counting that last bulk payment) almost $10000 in interest.

I don’t care how desperate you are. Find another way to get the money.

Mr. Burns: By the way, are you familiar with our state’s strict usury laws?
Homer: Usu-what now?
Mr. Burns: Silly me, I made up a word that doesn’t exist! Now about your loan…

I can’t speak for this particular bunch of sharks, but there are plenty of companies out there making what they call “payday” loans at usurious rates of interest (which often equal or even exceed the 99% rate mentioned in the OP). They will only lend someone money if he or she has a job, a checking account, and gets paid by direct deposit. The borrower must give the lender access to his or her checking account and authorize the lender to remove the payment directy from that account, and the payment due date is literally about thirty seconds after the borrower’s pay is deposited in the account.

Unless the borrower loses his or her job (which is a real risk, I suppose, but the lenders verify employment and have significant minimum-time-at-job requirements), there is no risk to the lender.

What do you propse as a solution for people who have appalling credit?

There are no simple answers. Outlawing these scum without some sort of well considered replacement is not likely to make things any better.

Try a $1000 loan in Idaho at 151.5% interest

http://www.cashcall.com/General/Rates.aspx

Actually, Gary Coleman did need to borrow money from them, as described here.

He probably does the commercials since he wasn’t able to pay back his 99% interest loan. :smiley:

Why do $2600 loans have the highest interest rates?

California
$20,000 Loan 24% 24.19% 120 $440.96
$10,000 Loan 21% 21.30% 120 $199.93
$10,000 Loan 34% 34.30% 120 $293.61
$10,000 Loan 39% 39.35% 120 $332.15
$10,000 Loan 44% 44.38% 120 $371.60
$5,075 Loan 59% 59.95% 84 $254.03
$2,600 Loan 96% 99.25% 42 $216.55

Alabama
$5,075 Loan 59% 59.95% 84 $254.03
$2,600 Loan 96% 99.25% 42 $216.55
$1,075 Loan 89% 96.78% 42 $83.89

Granted, some states have higher rates, but in a lot of cases, $2600 loans have higher rates than loans of greater OR lesser amounts.

Wow. I wasn’t that far off. And you didn’t finish reading the article.

[quote=SFGate=Reddam said he was introduced to the diminutive former star when Coleman came seeking $10,000. They soon cut a deal: In return for the cash, Coleman would repay his loan by appearing in CashCall’s ads.[/quote]

Maybe he wouldn’t be endorsing them if he had actually had to pay the money back.

Yes, but my point was that he initially approached the company simply as a person in need of a loan at usurious interest rates, and only later converted this into an endorsement deal, so it’s accurate for him to say that when he needed a loan he went to CashCall.

My state thought they were doing consumers a favor by limiting short term loans (those less than 90 days) to an annual percentage of 299%. Some check cashing outfits complained that limiting the interest rates this low would put them out of business. These places are everywhere so it is quite obvious they are making money.

Well that sorta surprised me. I went on to read a little more about his whole situation (and even a few other celebs that have declared bankruptcy). I guess it goes to show that no matter how much money you have, if you suck at handling money it’s not hard to burn it all up.

I thought the way these places work, they are located in either South Dakota or Delaware, which has no usury laws, but are able to operate in the other 48 states or whatever.

Don’t states have usury laws today? It’s too bad the state attornies general couldn’t figure out a way to effectively enforce them again.

State usury laws are no longer applicable to federally-chartered banks. Cite

“In 1980, due to inflation, national banks (banks that generally include N.A. in their name), federally chartered savings banks, installment plan sellers and chartered loan companies were exempted from state usury limits by the federal government through a special law. This effectively overrode all state and local usury laws.”

When I saw this ad I felt horribly creeped out by it all.
Cashcall: apply directly to forehead.