Interesting addendum to the buy-here-pay-here discussion


#1

Guy buys a used Blazer. With interest it would cost him $16,000. He put down 3300 as a deposit, got a 9k loan from a sub-prime lender, and the rest was interest.

He got sick and fell behind on his payments, so they repossessed the truck in 1994.

He’s still paying on that loan today, even though they repossessed the truck that was supposed to be collateral for the loan - or in other words, if they take the truck, that should at least knock whatever they then sell the truck for off the loan, but instead the $9k loan ballooned to $13k with fines and fees, and then later to over $27,000. Today despite having paid voluntarily and having his wages garnished for over 20 years, he still owes more than the original amount of the loan.

That’s what I’m talking about when I object to these crass auto loan companies (BHPH or sub-prime, same difference) preying on the poor.


#2

The GOLDEN RULE; “He who has the gold makes the rules” is no longer a quaint expression. Those who have the gold have given themselves licenses to rob those who need it.


#3

My pension plan used to hold shares in a very lucrative Payday Loan business that is located in the Deep South. I, and a lot of other pensioners, petitioned the pension plan to divest itself from its investment in that type of predatory business, and–to my great satisfaction–the plan trustees did what we requested.

I will gladly accept somewhat lower investment returns in exchange for NOT supporting companies that are usurious, and that cause lasting damage to people of low income.


#4

I understand that philosophy, but am yet unwilling to sell exxon shares,


#5

I have held shares in Exxon/Mobil, Chevron/Texaco, and Marathon for well over 20 years, and their lucrative dividends make me reluctant to sell those shares. I may well decide to divest those shares in the future, but in the meantime, they pay very nice dividends.

That being said, I don’t think that the business practices of those oil companies comes anywhere near the predatory nature of the Payday Loan companies that prey exclusively on people of very low income.


#6

I live in the state with the least protection from predatory lenders

http://www.mscenterforjustice.org/our-work/consumer-protection/predatory-lending

and have seen first hand how easily a seemingly minor emergency can result in someone becoming indebted for months and even years and even being arrested and spending time in jail. Taking a child to a clinic for the flu can cost several hundred dollars plus the cost of taking half a day off work and for those who struggle to make their pay check cover their monthly bills that doctor visit could mean becoming homeless and a payday loan will often delay becoming homeless a few months but then result in jail time and the loss of everything when the loan payments swell from late fees and penalties.


#7

It is not necessarily uncommon knowledge that a repossession does not release you from paying for the loan. In other words I knew that. It’s in the 3-4 page contract. And its not necessarily people in power making the rules, although they can, but people who loan money are interested in getting their money back so they put those rules in place, as states allow, to help them recover their loss.

I’m not trying to be a hard nose but cripe, if you deal with a loan shark instead of an FDIC banker, you expect some problems. Culture culture culture.


#8

Banking has become somewhat sleazy at every level and those who are at the bottom are the ones who most often get the shaft at the FDIC organizations. Just look at Wells Fargo. Banks found that posting checks from largest to smallest would produce the greatest possible penalties for struggling account holders so they programmed their computers to do just that.

And look at the bankruptcy laws and who wrote them. Of course payday loans and title loans cannot be bankrupted in most states while $multi million corporations can bankrupt debts to mom and pop contractors who might go out of business as a result if not for the legal loan sharks.

In a small town operating an auto repair shop I saw a great deal that troubled me and there were far more people being screwed by crooked mechanics, crooked employers, crooked car dealers and crooked loan companies than there were people trying to get away without paying me.


#9

@Rod_Knox

Where are you in MS?

As for the buy here / pay here loan sharking…as long as there’s money and power to be had, there will be those willing to do anything to get it, even at the expense of others. We’re not living in a perfect world, unfortunately.

I will say- sometimes people let themselves get taken advantage of by letting their wants outweigh their means. Someone trying to make ends meet, I understand. But if you’ve just “got to have” a flatscreen and you rent to own at high interest - you’re kinda bringing the problem on yourself.


#10

Reminds me of high school car-driving class. In my state every 15 year old kid had to take that class get their driver’s license. I clearly recall one of the instructors asking this question to the class: If you buy a car on credit, are making the monthly payments on time each month, and it gets damaged in a collision and is no longer drivable, do you still have to make the monthly car payments? 2/3 of the students raised their hands to say “no” . When the instructor told them “yes, you still have to make the payments” some of the kids got really upset. But the instructor calmly explained why, and it was a pretty good learning experience.

I also remember the instructors in that class would sometimes ask questions nobody in the class would know. Like on one quiz : what is the difference between rocker panels and rocker arms? What teenager other than the hot rodder set is going to know that?


#11

I had a teacher in Jr. High that made the comment that he hoped we were all a million dollars in debt by the time we were 30. His reasoning was, as long as you were able to make the payments on that many loans, you must have a decent income and would have the use of a lot of nice things.

I didn’t listen much to that guy. I hope my classmates didn’t either.


#12

Which means the person loaning you money has an incentive to be an unreasonable hardass about repossession, because if he repossesses the car he gets to make you pay full price for the car, and sell the car to someone else. Sounds like a great way to get rich at the expense of others.

It’s not right. The car is a valuable thing that is put up as collateral for the loan. If the loan is canceled due to non-payment, and you take the valuable thing back and make money on it, then the original loanee shouldn’t owe you any more than the difference between the loan amount and what you sold it for.

And since you don’t have any choice because you need to get to work and public transit is inadequate because the same people who say what you just said also stand firmly against funding a properly-running public transit system, you deal with the loan shark or you end up homeless.

We can justify these things all we want, and even if it’s true that it’s all these people’s fault, we have to take into consideration the harm to society. The French Revolution didn’t happen because all the poor people loved being poor and at the mercy of the rich.

If we’re going to allow society to make owning a car a requirement in most places in order to earn a living, and we’re going to allow society to look the other way when loan sharks take advantage of people because of that, then, as you say, we need to expect some problems.


#13

I bought my first car the day after they stopped the bus service at midnight and I had to walk the 6 miles to my house after working the loading dock all evening.

It was $20 and I had to learn to fix it because I had no money to pay a mechanic. In those days, no one would give you a credit card if you had no money. Boy, how times have changed.

My wife had a friend in her 70s whose income was only social security and she had over $20,000 in credit card debt she couldn’t pay. After she declared bankruptcy,she was inundated with credit card offers.


#14

The finance company is remarkably persistent in collecting this debt. Perhaps if Richard Parker knew this in the beginning he would have made an effort to repay the loan instead of dodging the bill collector. People have been known to quit their jobs after wage garnishment begins, if his income really went towards the debt this would have been paid off years ago. This is a good lesson for those who think they can walk away from their responsibilities.

Richard Parker had $3400 to buy a car, he could have bought two used cars in 1991 with that money but he had to have the SUV (conspicuous consumption). The story states that this truck sold new for $12,700, a co-worker bought a Chevrolet Blazer in 1990, the last year they were made, I believe the price was more than $20,000.


#15

Heh, heh. The reason is that they cannot do it again for 7 years so its a pretty safe bet.

I just reject the whole idea that unless we provide everything to everybody so they can’t get hurt, it’s that nasty old society that is causing a problem for people that refuse to deal with honorable people. Because I don’t want to spend my money to provide bus service where it makes no sense, it’s not my problem that someone needs to buy a car or a bike. I paid $125 cash for my first car and have always had a bike before that. Tough in the rain buy works. I think they are called lawn mower parents now that want to mow down every obstacle in their kid’s path so they are never able to figure out how to survive themselves.


#16

I had thought about a bike when they discontinued the bus service but it would be a really tough and unsafe commute in Buffalo winters. I think some things should be subsidized. We make people pay taxes for all sorts of things they don’t use, like school taxes if you don’t have children, roads, even if you don’t drive and libraries , even if you don’t read. I think reasonable public transportation is one of those things.

I saw a very interesting documentary a few years ago about how GM secretly bought and closed small inter city bus companies after WWII to force more people to buy cars.


#17

What amazes me the most about this article is not that sleazy finance companies make these type of loans, or that they aggressively collect through the courts when the debtor defaults. What amazes me is that a person would allow their wages to be garnished for years on end, to the tune of many thousands of dollars, when a simple Chapter 7 bankruptcy filing would have stopped the collection efforts and kept all this money in his pocket.

Even if bankruptcy was not an option, changing jobs every few months, which is easy to do when you work in a low-paying, high-turnover industry would have thwarted the judgment creditor’s garnishment efforts.


#18

That is what these people do, I worked with people that would disappear after 3-4 months when the creditors caught up with them. If this guy was really making payments though garnished wadges it would not take 27 years to repay the loan.


#19

Who is legitimately suggesting that? This guy should have paid off his debt. But he should have paid off only his debt, not three times his debt plus losing the thing the debt was incurred for so that the entity holding the debt could make even more money off of it.

If the debt hadn’t ballooned to an absurd amount, he could have gotten out from under it. But instead he fell victim to a system that is specifically set up to trap him in an unending spiral of debt.

Again, yes, he made a bad choice, although at the time of his choice it wasn’t all that bad because he could afford to discharge the debt. No one can predict what’s going to happen in 2 years. I have a mortgage. It’s costing me more per month than the mortgage payment because I have an insurance policy that will pay on the mortgage if I get too sick or disabled to keep working. I’m not sure such things are, or more to the point were, available back in the 90’s for car loans, especially for people with bad credit. If I didn’t have that policy I’d be taking the exact same risk this guy took, because I can’t possibly afford to pay off my mortgage if I lose my job.

What gets me about these conversations is that we all take risks, but the higher on the socioeconomic ladder we are, the more those risks are absorbed by people who are lower on the ladder. The banks took huge risks in the buildup to the housing crisis, and when they lost their gamble, the entire country gave them money to cover the loss, and they still insisted on collecting that money a second time from their debtors.

That’s building again, and this time it’s in car loans. People are taking out 8 year loans to buy $60,000 pickups. Yes, that’s insanely stupid on the part of the people taking out the loan, but it’s also insanely stupid on the part of the banks because as soon as people start defaulting on those loans, the whole system’s going to collapse again. Of course, the banks have no particular incentive to care because they made out like bandits the last time the system collapsed.

That’s what this boils down to - do you have the sense that you need to act responsibly toward society as a whole or not? “This person who has no financial education and may not have even graduated high school did something dumb by believing this other guy who has a masters in financial management who told him the loan was no problem” is a true statement. But it overburdens the debtor with responsibility that is at minimum shared 50% with the company handing out the loans and it ignores the fact that when the system collapses, again, the vast majority of us are going to suffer, again.


#20

Since the buy here pay here topic came up, I have been getting advertisements for a lawsuit against TitleMax here in Missouri. Apparently they were conducting illegal repos for people who missed one payment or only by a short time. Title loans definitely seem predatory if you ask me based on their very nature. Again, that is a bad decision of the borrower so they kinda got themselves in the situation they are in.

In my business I used to not require any money upfront. You would be amazed at the number of people who just vanished, leaving their repaired equipment behind without a trace or phone call. Some wouldn’t answer their phones and some would have a number that got disconnected. This always made me wonder what happened or if they were running from someone. Besides this and other drama, I started charging money upfront and that reduced this nonsense by about 95%. Before I did this around 50% of the equipment brought in for repair would simply be abandoned without payment. It was nuts.

My company was recently taken to small claims court by some entitled nut. The judge threw it out but I got to sit through quite a few other cases and observe the stuff that goes on. It was crazy. People would just walk away from and abandon property wherever. Some car lot off a main road would just have cars left behind on their lot at night. They couldn’t find the owner and such. Then the car lot is stuck with a car they can’t legally sell or dispose of as many of these were basically junkers. They have to figure out if there are any liens, store the car during this process, and then wait a certain time window to make sure the rightful owner doesn’t come forward to claim the car. Apparently this one car lot waited for several of these to build up in the system as to only have to appear in court once for several cars instead of coming back each time a new unwanted car showed up on their lot. From what I could tell these were all basically junk and they wanted to get titles so that they could legally have them sent off as scrap.

I swear that if I was retired and had nothing else to do, I would just go sit through court cases as you just can’t make up some of the stuff that goes on. It is certainly more entertaining than afternoon TV.

For those who don’t think you need to repay the loan on a car that gets wrecked, that is what insurance is for. All banks require anything they make a loan on be insured against loss. A simple liability policy will not do either. Yes, you can do that on a car that is paid for but not one where money is owed.

Then there is gap insurance so if the value of the car is less than the value of the loan balance (common), you won’t have to pay that amount either. I bought a new car a couple years back and when I went to State Farm, they offered me the option of financing through them as well as getting my insurance. Free gap insurance was part of that deal. The rate was also better than the one I had so I went with it.