Car repair loans can charge extremely high interest
Loans intended to make car repairs more affordable may not be as good as the deal sounds.
Consumer groups are warning against loans with interest rates of up to 189% at national auto repair chains. A group sent letters this week to chains such as AAMCO, Precision Tune Auto Care, Big O Tires, Midas, Grease Monkey, Jiffy Lube and Meineke.
They are urging stores to stop offering financing through EasyPay Finance, which handles loans through the Transportation Alliance bank.
Consumer groups have found that high-interest loans are being offered in states that have lower interest rate caps.
“Banks are, are exempt from state interest rate limits,” said Lauren Saunders of the National Consumer Law Center. “So sometimes predatory lenders find a rogue bank and launder the loan through the bank and call it a bank loan. A company like EasyPay Finance cannot charge 189% directly in many states, but it does so by claiming that its loans are bank loans and are exempt from state law.
The loans promised no interest if paid within 90 days, but Saunders said many people couldn’t get it.
“They’re dealing with an expensive auto repair,” Saunders said. “They don’t think about loans. Their hands on a tablet and they’re told to click here or there even asked to do it on their phone and try to read the fine print on a small three-inch screen. Always make sure you really see the entire contract.
The National Consumer Law Center advises if you take out one of these loans, opt for the 60-day forced arbitration clause. You can also file a complaint with the Consumer Financial Protection Bureau or your attorney general.
In a response, Jiffy Lube said he had no relationship with EasyPay Finance or was aware of any of its franchisees working with them. The parent company of Midas and Big O Tires said EasyPay Finance is one of many sources of financing that some franchisees choose to make available to their customers.
Banks must be licensed by the Federal Deposit Insurance Corporation.
There is a bill in Congress that would cap interest rates nationwide at 36% for all lenders, preventing loans like this in the future.