A company that provides loans for car repairs, furniture and pets to consumers, including U.S. service members, is charging up to 189% interest in some areas, working with a Utah-based bank to sidestep federal laws that limit predatory loans, a new report alleges.
EasyPay Finance, a Carlsbad, California, company behind repair loans offered at places like AAMCO, Jiffy Lube, Midas and Meineke, and pet and furniture stores near military bases, has teamed with Ogden, Utah-based Transportation Alliance Bank to make loans with annual interest charges of nearly 26% to 189%.
Such rates are illegal in most states for lenders that aren't banks, but EasyPay issues the loans through Transportation Alliance, allowing them to be classified as bank loans, a practice known as "rent-a-bank," according to a coalition of advocacy groups, including the National Consumer Law Center, the Center for Responsible Lending and the National Military Family Association.
Complaints from military borrowers to the Consumer Financial Protection Bureau seem to show that the companies are violating or circumventing the 2006 Military Lending Act, which limits annual interest on loans to active-duty service members or their families to 36%.
"It is unconscionable that TAB Bank and EasyPay Finance are making loans with up to 189% interest to servicemembers and veterans," said Lauren Saunders, associate director of the National Consumer Law Center, in a press release. "Auto repair shops, pet stores, and other retailers concerned with their reputation should stop steering customers to predatory loans by TAB Bank and EasyPay Finance."
The National Consumer Law Center is one of several organizations that have petitioned the Federal Deposit Insurance Corporation, which regulates banks, to crack down on these types of arrangements between lenders and banks.
In a statement to Military.com, an EasyPay Financial spokesman said the company serves a "traditionally underserved community" that often can’t get funding from traditional banks and credit services.
"EasyPay facilitates finance options to ensure that more people have access to credit to pay for their most pressing needs," said the spokesman, identified as Dan BC. "We are transparent about the cost of our services and the repayment options, and there are a wide range of interest rates based on individual credit and products selected."
According to EasyPay Finance, it coordinates loans in 30 states with Transportation Alliance Bank. Dan BC said that all the financial service products offered to consumers are "in accordance with applicable law, including the Military Lending Act and the Servicemembers Civil Relief Act."
Officials with TAB Bank did not respond to a request for comment.
"The Department of Defense studied high-interest loans like those issued by EasyPay Finance and TAB Bank and concluded they harmed troops and their families -- and undermined military readiness," said Nadine Chabrier, senior policy counsel at the Center for Responsible Lending, in a statement. "The FDIC is responsible for supervising TAB Bank and should stop it from abusing its charter by enabling these predatory loans."
Dozens of military personnel have complained to the CFPB or the consumer website Ripoff Report about EasyPay or its owner, Duvera Billing Services, alleging high interest rates, problems with debt collection, harm to their credit reports and issues with automatic payments or the promises rebates of interest if paid within 90 days.
One military consumer in Illinois received a $1,500 loan for a car repair and has since made $2,300 in payments but still owes $1,300 -- an interest rate of 151%.
Another military customer in Virginia Beach took out a loan nearly two years ago to repair their transmission but noticed after receiving statements that they were being charged 96% interest.
"I called the company and told them I was a service member and that I couldn't get charged. ... They said they would fix it but nothing has happened. ... I still owe about 80% [of the original principal]," the borrower wrote to the CFPB.
Still others wrote about getting a loan to buy a puppy and paying three times the original cost with a loan from EasyPay or Duvera. An active-duty service member in Nevada was charged an interest rate of 189% on an $800 loan.
"I will end up paying out $2,400, which will put $1,600 in this companies [sic] pocket. Your [sic] welcome! I'm fighting for your right to rip off hardworking American people, DUVERA!"
The company responded on the CFPB website, saying that it believed the firm had acted "appropriately as authorized by contract or law," according to the site.
Besa Pinchotti, head of the National Military Family Association, said such predatory practices are unacceptable, especially against military families trying to make ends meet.
"Military families make tremendous sacrifices for our country every day. It's outrageous that after all the work we've done to protect our military families, they continue to be preyed upon by lenders," Pinchotti said in a statement.
Editors Note: This story was updated to correct the base interest rate charged by EasyPay Finance.
-- Patricia Kime can be reached at Patricia.Kime@Military.com. Follow her on Twitter @patriciakime