Loans meant to make car repairs more affordable may not be as good as the deal sounds.
Consumer advocacy groups are warning about loans with interest rates as high as 189% at national car repair chains. A group sent letters this week to chains including AAMCO, Precision Tune Auto Care, Big O Tires, Midas, Grease Monkey, Jiffy Lube and Meineke.
They are urging shops to stop offering financing through EasyPay Finance, which runs the loans through Transportation Alliance bank.
Consumer groups found that high-interest-rate loans were being offered in states that have lower interest rate caps.
“Banks are, are exempt from state interest rate limits,” said Lauren Saunders with the National Consumer Law Center. “So predatory lenders sometimes find a rogue bank and launder the loan through the bank and call it a bank loan. A company like EasyPay Finance can't charge 189% directly in many states, but they are doing it by claiming that their loans are bank loans and are exempt from state law.”
The loans promised no interest if paid in 90 days but Saunders said a lot of people aren't able to get that.
“They're dealing with an auto repair that's expensive,” Saunders said. “They're not thinking about loans. Their hands at a tablet and they're told to click here or there even asked to do it on their phone and try to read the fine print on a little three-inch screen. Always make sure that you really see the whole contract.”
The National Consumer Law Center advises if you take out one of these loans, opt out of the forced arbitration clause within 60 days. You can also file a complaint with the Consumer Financial Protection Bureau or your state attorney general.
In a response to us, Jiffy Lube said it has no relationship with EasyPay finance or has knowledge of any of its franchisees working with them. The parent company of Midas and Big O tires said EasyPay Finance is one of several financing sources that some franchisees choose to make available to their customers.
Banks are required to be licensed through the Federal Deposit Insurance Corporation.
There is a bill in Congress that would cap interest rates nationally at 36% for all lenders, preventing loans like this in the future.