A MAN was taken advantage of by the terms on his loan contract, forced to shell out a whopping $13,664 for the $2,500 he had borrowed.
The sneaky customary fee rate was hidden in the fine print of the contract, pushing the Tennessee man to cough up thousands of dollars more than he expected.
A Tennessee man was left in a bind due to the terms on his loan contract[/caption]
The man was forced to pay over $13,000 for his $2,500 loan[/caption]
Some borrowers in Tennessee are subject to hefty interest rates surpassing 200% on legal loans, a type of personal loan that pays for the cost of legal representation and related expenses.
Such a high interest rate can leave Americans in a bind, forcing them to pay more on interest than the cost of their original loan.
This was the case for James Pointer, a man from Middle Tennessee – home to Nashville – whose legal loan quickly turned into a financial nightmare.
Pointer has been employed his entire life, avoiding debt until his wife had an unfortunate injury that left her unable to work.
The Tennessee man, suddenly confronted with financial strain, opted to take out a small short-term loan of $2,500.
“My wife got sick, so I had to figure something out,” Pointer told a local Fox outlet. “I thought about TitleMax.”
The husband planned to pay $400 each month towards his loan, getting rid of his debt within one year.
His plan was quickly uprooted, however.
Although Pointer never missed a payment on his short-term loan, he found himself owing more than the original $2,500 after making consistent payments for almost two years.
“I was in a jam,” he said. “You feel stuck.”
TRICKY TERMS
The sneaky terms of Pointer’s loan put him in the financial hole.
Certified public accountant and former Metro Nashville council member Charlie Tygard read through the man’s contract to gain a better understanding of his loan’s terms.
“Even lawyers wouldn’t read all of this,” Tygard told the local outlet. “They bury you in paperwork.”
Hidden in the fine print, the CPA found to a key detail: an annual percentage rate, or APR, of 215%.
The terms also included a “customary fee rate” of 191.88% per year, outlined in small print in another section of the contract.
This fee was charged to Pointer in addition to the already-high interest.
“You’re behind the eight ball before you even start,” said Tygard. “This makes the loan nearly impossible to pay off.”
A CRY FOR HELP
Pointer made steady payments of roughly $450 each month in hopes of paying off his debt, but it seemed hopeless.
The Tennessee man paid $451.09 toward his loan in July 2023, for example, but the interest and customary fee that month were a whopping $451.10.
Despite Pointer’s consistent payments, his principal balance hardly budged.
“They’re signing something they don’t understand,” said Tygard. “They’re being taken advantage of, and most will eventually give up – lose their vehicle, get sued, or have liens placed on their assets.”
Rather than give up, Pointer looked to his boss and friend, Steve Richards, for help after almost two years of the loan battle.
Richards obtained the loan documents and paid off Pointer’s remaining balance of $3,153.36.
“He would’ve never paid it off,” said the boss.
Pointer ended up shelling out $13,664.37 over 24 months, much higher than his original $2,500 loan.
Pointer’s loan: by the numbers
- Loan amount: $2,500
- Monthly payment: ~$450
- Total paid over 24 months: $13,664.37
- Final balance before payoff: $3,153.36
Source: Fox 17
Although technically legal, Richards criticized the system as being broken.
“People need money so badly that they’ll sign anything just to get cash that day,” he said. “The people who can least afford it are paying the most. It’s deeply disappointing that this is legal in Tennessee.”
TitleMax president Bill Baker shared the following statement with the local outlet:
“We are required by law to disclose an annual percentage rate for our loan products, but the reality is our customers use these workforce or bridge loans to fill the gap when life happens outside of their normal budget.
“We go above and beyond to educate customers on how best to use our services and do our best to tailor the right loan for the right situation.”
TitleMax holds licenses under the Tennessee Flexible Credit Act and the Tennessee Title Pledge Act, which permit lenders to charge fees and interest of up to 264% APR.
Other Americans have found themselves in tricky financial situations.
For example, one man died of a heart attack a day after permanently losing $6,800 – he thought he was answering a call from Wells Fargo.
Meanwhile, duped Americans are “paying for rain” thanks to a sneaky water fee in nine US states – check your area and how to fight back.
