Predatory lending practices are becoming more common when it comes to companies attempting to “help” consumer fund car repairs. Many of the major car repair shops, including AAMCO, Jiffy Lube, Midas, Precision Tune Auto Care, Grease Monkey, and Meineke, are offering financial assistance to consumers who are not able to pay for their car repair expenses. The problem is, these car repair loans can end up charging up to 189 percent interest, according to a recent study by Consumer Reports.
Many states have laws issuing caps on interest rates to avoid predatory lending practices. However, companies have become wise to these laws and evade them by teaming up with a bank in a state that does not have an interest rate cap. This practice is also known as “rent-a-bank,” and it falls into a legal gray area.
Many of these auto repair companies offer loans through a company called EasyPay Finance. This company runs their loans through Transportation Alliance Bank (TAB), based in Utah, a state where high interest rate caps do not exist. TAB is one of the banks mentioned in the Consumer Reports studies where interest rates charged went as high as 189 percent.
Unfortunately, customers do not always have time to do their homework or investigate alternative sources of funding. Car repairs can come out of nowhere, and they can be quite expensive. To not lose a potential customer, the auto repair shops partner with EasyPay finance and offer an interest-fee loan to pay for the repairs. However, there is a catch. The loan must be paid within 90 days or interest will be charged.
According to complaints lodged with the Consumer Financial Protection Bureau (CFPB), EasyPay Finance and its parent company, Duvera Billing Services, LLC, charge consumers unexpected fees and interest that then make paying the loans off nearly impossible.
Another CFPB complaint accused the company of reporting consumers to credit bureaus as having both a monthly payment and balance due, even though the balance was current, and payments were being made. Even more disturbing were consumers who reported that their accounts were reported as delinquent even though they were paid in full.
When asked about these issues with EasyPay Finance, representatives at Jiffy Lube International, stated that they had no relationship with EasyPay, but that their service centers are independently owned franchises who may or may not have a relationship with a variety of vendors. Similar statements were made by a spokesperson for TBC Corporation, the parent company of Midas and Big O.
If a consumer has concerns regarding the legitimacy of an offered lending program, he or she should first carefully review the terms of the loan before signing, including reviewing the interest rates, repayment requirements and details of any specific promotional offer. When in doubt, a credit card or obtaining a personal loan through the consumer’s own bank he or she trusts to pay for the repairs.
Any loan with an interest rate above 36 percent should be avoided. Borrowers should always get a copy of any agreement that they sign, and they should verify that their copy matches up with their understanding of what the terms of the agreement are. Never feel pressured to accept an offer if any of the terms sound suspect or “too good to be true.” Do a general search on the lending company with the Better Business Bureau (BBB) first before agreeing to work with them. This extra time and effort will pay off in the end when then consumer avoids falling prey to predatory lending practices.
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