This article details the experience of a man named Pointer who took out a $2,500 loan from TitleMax with the intention of paying it off within a year. Though, his plan backfired due to the extremely high interest and fees associated with the loan.
Here’s a breakdown of the key points:
The Problem: Pointer made consistent payments for nearly two years, but his principal balance barely decreased, and he still owed more than the original loan amount.
The Cause: A certified public accountant, Charlie Tygard, reviewed the loan contract and discovered a staggering 215% APR and a “customary fee rate” of 191.88% annually, in addition to interest. This effectively made the loan nearly impossible to pay off.
The Impact: Pointer’s monthly payments of around $450 were largely consumed by interest and fees, with vrey little going towards the principal. For example, in July 2023, his payment of $451.09 was almost entirely absorbed by $451.10 in interest and fees.
The outcome: Pointer was eventually able to pay off the remaining $3,153.36 balance with the help of his boss, Steve Richards. In total, Pointer paid $13,664.37 for a $2,500 loan over 24 months.
The System: Richards criticizes the system, stating that people in desperate need of money sign anything, and those who can least afford it end up paying the most. He expresses disappointment that such practices are legal in Tennessee. TitleMax’s Response: TitleMax President Bill Baker stated that they are legally required to disclose the APR and that their customers use these loans as “bridge loans” to fill gaps. He claims they educate customers and tailor loans to their situations.
legal Loopholes: While Tennessee advertises a maximum loan interest rate of 11.5%, this only applies to mortgage lending. TitleMax operates under the Tennessee Flexible Credit Act and the Tennessee Title Pledge Act, which permit total APRs of up to 264%.
Comparison: The article highlights the stark difference by comparing Pointer’s situation to a loan with a 30% APR, which would have resulted in a $232 monthly payment and full payoff in two years.
* Future Action: FOX 17 News plans to bring this inquiry to Tennessee lawmakers.
In essence, the article exposes how predatory lending practices, operating within legal loopholes, can trap vulnerable individuals in a cycle of debt, even when they make consistent payments.