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EasyPay Finance and the Trap of Auto Repair Loans
Plus, notes on buy now, pay later and credit reporting errors
Consumer Checkbook has a story out about car repair lender EasyPay Finance and their predatory tactics that can trap consumers in loans carrying interest rates as high as 199%.
I’ve written before about EasyPay and their shady practices.
As Consumer Checkbook notes:
EasyPay’s loans, which promise “no interest if paid in 90 days” — may seem like a sensible way to pay for an expensive repair. Chances are, it’s not. All too often, that “free financing” turns out to be a costly loan — with interest rates that can be as high as nearly 200 percent.
And it’s not exactly “free” financing:
An EasyPay loan is only interest free if the full amount financed — and a $40 fee is paid — before the end of the 90-day promotional period noted in the contract. Critics claim the program is designed to make it difficult for borrowers to meet those conditions.
How does EasyPay get away with charging rates it admits can run up to 199%? They partner with Utah-based TAB Bank — a known collaborator with predatory lenders.
Again, from Consumer Checkbook:
Non-bank installment loans with a 189 percent interest rate are illegal in most states. But in some states, Duvera Billing Services (the California company that owns EasyPay Finance), uses Utah-based Transportation Alliance Bank (TAB Bank) to “launder its loans,” so it can “evade state laws” and charge interest rates “that it cannot legally charge as a non-bank lender,” Lauren Saunders of National Consumer Law Center, said.
A coalition of consumer groups recently sent letters to major auto repair shops calling on them to stop doing business with EasyPay.
A coalition of consumer advocacy groups has sent letters to top auto repair chains across the nation calling on them to stop offering financing for repairs through EasyPay Finance and TAB Bank, noting the loans can carry interest rates as high as 189%.
The letters were sent to AAMCO and Precision Tune Auto Care (Icahn Enterprises), Big O Tires and Midas (TBC Corporation), Grease Monkey (FullSpeed Automotive), JiffyLube, and Meineke (Driven Brands).
Notes on Buy Now, Pay Later - including PayPal and Apple
On the heels of an announcement that Apple is entering the Buy Now, Pay Later space, PayPal has announced it is expanding its Buy Now, Pay Later options.
Techcrunch reports that PayPal will now be offering a monthly payment option in addition to its “PayLater” plan.
“After Apple shook up the Buy Now, Pay Later market with news that it would now be a competitor to established firms, PayPal this morning is introducing another buy now, pay later product to follow the 2020 launch of its “Pay in 4″ installment program. The new offering,
PayPal Pay Monthly,” is designed to give customers a more flexible way to pay, the U.S. payments giant said. Instead of having to pay off purchases over a 6-week period as before, “Pay Monthly” users can break down the total cost into monthly payments over a 6 to 24-month period.”
The announcement of two industry giants adding new elements to the Buy Now, Pay Later game points to the growing popularity of these products.
Consumers should take caution, however. These products often come with hidden fees and managing multiple BNPL loans can wreak havoc on a bank account.
In fact, one survey indicated:
32% of Buy Now Pay Later plan users have had to skip paying an essential bill such as rent, utilities or child support in order to make their payments. Even after that, 30% report that they’ve struggled to make their payments.
It’s clear that tech giants and payment services see BNPL as a key profit center. What’s less clear is what types of consumer protections are necessary to ensure these small loans don’t become debt traps for borrowers.
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Another Story on Credit Reporting Errors
A report released by the Consumer Financial Protection Bureau (CFPB) exposed the financial harms to military families caused by faulty credit reporting.
According to the report, servicemembers told the CFPB about billing inaccuracies and that debt collectors used aggressive tactics to recover allegedly unpaid medical bills. Servicemembers also reported failures by credit reporting companies in helping to resolve inaccuracies and other credit reporting issues.
In a statement, the CFPB said these failures of credit reporting and debt collection systems can impact financial readiness.
“Errors on credit reports can jeopardize servicemembers’ financial readiness, and ultimately, their ability to protect our nation,” said CFPB Director Rohit Chopra. “No servicemember, veteran, or military family should be subject to credit reporting rumors and innuendo, nor should they feel coerced to pay a bill they do not owe.”
The report noted the special harms that may be caused to members as a result of faulty credit reporting. In fact, servicemembers may be at particular risk from harm caused by coercive credit reporting tactics, given that negative items on a credit report can jeopardize a military career.
The report found:
Servicemembers have concerns about faulty credit reporting: In 2021, servicemembers submitted more than 17,000 credit or consumer reporting complaints, making it the top topic for complaints. When issues with credit reporting, debt collection, or medical billing are not appropriately resolved, the consequences for servicemembers and military families can include loss of housing, separation from service, denial of security clearances, or loss of access to affordable healthcare.
Nationwide credit reporting companies fail to appropriately respond to servicemembers: Credit reporting companies were not responsive to servicemembers’ requests for investigations. Complaints indicated that investigations took too long and failed to correct errors on their credit reports. Servicemembers reported that they feared that inaccurate medical billing information on their credit reports could cause irreparable harm to their careers.
Medical billing errors and inaccuracies are a driver of complaints about credit reporting and debt collection: Despite the widespread expectation that a core benefit of military service will be full coverage of medical expenses, servicemembers experienced a range of debt collection and credit reporting activity related to allegedly unpaid medical bills. In 2021 alone, more than half of medical debt collection complaints from servicemembers were about debts the individuals reported they did not owe. Many of these complaints stemmed from breakdowns in communication between private health care providers and TRICARE, the health insurance program for active-duty military.
As a result of the findings of the report, the CFPB recommends:
Medical providers and third-party billing companies should have adequate systems in place to serve servicemembers, veterans, and military families enrolled in TRICARE and the Veterans Choice Program: Complaints suggest that billing issues often occur when providers or third-party billing companies fail to work with TRICARE or the Veterans Choice Program to get paid for servicemembers’ care.
Medical providers, as well as nationwide credit reporting companies, should consider emulating recent changes by the Department of Veterans Affairs: Veterans Affairs recently implemented a new rule that includes requirements to exhaust all other collection efforts and review patients’ ability to repay before reporting a medical debt as unpaid. Delayed reporting of servicemembers’ allegedly unpaid medical bills to credit reporting companies for a period of time can afford servicemembers an opportunity to address inaccurate or not owed bills.
So, what happens if you do find an error on your credit report?
The National Consumer Law Center (NCLC) offers this advice:
“Consumers should never pay for credit repair–it’s a waste of money,” said Andrew Pizor, an attorney with NCLC. “You can get a free credit report and can fix errors yourself by going to annualcreditreport.com. Unfortunately, nothing but time can cure accurate negative information.”
Finally, a note on why fixing errors in your credit report can be difficult.