Discover more from Advocate Andy
Is the Dave App's Cartoon Bear a Payday Predator?
Plus, predatory auto repair loans - from the people who brought you predatory puppy loans
Should you get a loan from a cartoon bear on your phone?
This is a question I asked back in January. The answer then was to proceed with extreme caution.
A new story from the L.A. Times digs deeper, explaining just how bad the fees associated with friendly, cartoon bear apps can be.
Here’s how the Times broke down the fees associated with a loan from Dave:
Given that the money had to be repaid in 12 days, the $5.99 fee and $2 tip, if considered as interest, cost Goad 122% on an annual percentage rate basis — a metric that helps compare the relative cost of loans. If he tipped $6.93, the company’s average in the first quarter, it would amount to an APR of nearly 200%. If he chose a 15% tip, the total cost would rise to $35.99 with an APR of 547% — corner payday loan territory.
Consumer advocates suggest the Dave app may be technically better than a payday loan, but not by much:
“Traditional payday loans and traditional overdraft fees are so awful that it’s not hard to be a little cheaper and a little better — and some of these [apps] may be,” says Lauren Saunders, associate director of the National Consumer Law Center. “But are they promoting people’s financial health? That is much more debatable.”
While tip-based apps that offer non-traditional small-dollar loans may be popular, they do come with fees. And while Dave founder Jason Wilk says they were meant to “kill” overdraft fees at the bank, many banks are now moving away from overdraft fees anyway.
Screenshot by author
Predatory Auto Repair Loans
Remember the people who brought you predatory puppy loans? Yep, the folks at EasyPay Finance and TAB Bank are at it again - this time with predatory auto repair loans charging rates up to 189%.
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).
The letters follow a report of consumer complaints about receiving loans for auto repairs only later to discover the loans were not interest-free and in fact, carry exorbitant interest rates.
The consumer groups sending the letters include Accountable.US, Americans for Financial Reform, Center for Responsible Lending, CLEAR, Consumer Federation of America, and National Consumer Law Center.
“Consumers struggling to pay for auto repairs repeatedly report being steered into predatory loans with shocking and often deceptive rates hidden in the fine print of applications, frequently not known until after the repairs are completed,” the letters state. “These predatory loans have a lasting impact on consumers, causing harm to their credit reports and leading to debt collection harassment.” The letter urged each repair chain “to disassociate itself from these practices that exploit vulnerable families.”