You guys are awesome. I’m scrambling to get things organized before I leave for London this weekend, and GRS readers continue to send me great story ideas and guest entries. I won’t get to all of them before I leave (not even close!), but you’ve given me lots of fodder for when I return.
Here’s one I can’t pass up, though. Two readers — Jeremiah and Matt — sent me the exact same story, and both included photos to go with it. It seems that lovable rascal, Gary Coleman, has found a way to recover from bankruptcy. He’s pitching outrageous loans to people who don’t know better.
Whatchoo talkin’ ’bout, Willis?
I haven’t seen the commercial myself, but with the help of modern technology, we’re able to examine the gory details:
I know that fine print may be difficult to read, so I’ve transcribed it for you:
The APR for a typical loan of $2,600 is 99.25% with 42 monthly payments of $216.55. Credit approval is not guaranteed and depends on the lender’s credit standards. Complete disclosure of APR, fees, and payment terms available on request. Limited documentation required. California loans will be made pursuant to CashCall’s California Department of Corporations Finance Lender License No. 603-8780. Idaho Department of Finance Regulated Lender License 4428. Nevada Department of Business & Industry Installment Loan License NO. IL05343. New Mexico Small Loan License No. 01285. Loans in all other states will be made by First Bank of Delaware (Member FDIC).
“I don’t know why they didn’t just go all the way up to 100%,” Jeremiah writes in his e-mail. Neither do I, but I’ll bet that there’s some legal clause that defines 100% APR as usurious. As if 99.25% is any better. On a lark, Matt actually tried to go through the application process after he saw the commercial, but he was out of luck (or maybe that’s “in luck”). His home state isn’t eligible:
I decided to see how much a borrower would pay for the “typical loan” from the fine print — $2,600 at 99.25% for 42 months. The Bankrate loan calculator won’t take interest rates over 99%, so that’s what I’ve used. Close enough. After three-and-a-half years, the borrower would have repaid the $2,600 principal and $6,743.61 in interest. That’s more than two-and-a-half times the loan amount.
How can the people who own CashCall sleep at night? Just because you can find suckers to borrow money at rates like this doesn’t mean you should loan them the money. Ultimately, however, the responsibility rests with those who borrow money at these exorbitant rates.
Folks, it bears repeating: READ THE FINE PRINT ON ANY DEBT YOU INCUR. Read the fine print on loan documents. Read the fine print on your credit card agreements. Read the fine print on your mortgage. (This latter one is very important. I don’t care if you have to sit in the title company’s office for two hours while the person helping you steams and fumes about being late for dinner — read your mortgage documents before signing them.)
I spent four hours today going over the paperwork for my new credit card before activating it. I found several discrepancies, and called to have them clarified. The banks do not have your best interest at heart. You must look out for yourself. If you don’t, you may find yourself borrowing money at 99.25% from a shady company endorsed by a C-list television star.
(I’m almost afraid to look at the ads Google has decided are appropriate for this post. I’m sure they’re the very thing I’m railing against. Man, I wish they’d let me expand my “banned advertisers” list…)
Addendum: Miranda did some digging and found these commercials on YouTube (which is pretty apt considering the post I’ve written for this afternoon):
Addendum II: My wife pointed out a related article from the local paper. The state legislature recently passed new regulations on the payday loan industry. Now payday lenders have lost interest in Oregon. (Yes, I think it’s a terrible pun too.) They’re packing up shop and leaving because they’re no longer able to charge APRs as high as 520%!