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 Posted: Tue Oct 02, 2007 3:24 pm Subject: Cash Call Newspaper Article...
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This was published in my newspaper today..This is a Q&A:
| Quote: | Personal Finance Notebook: 96 percent consumer loan rate is legal
Story appeared in BUSINESS section, Page D1
Question: My daughter called me about an online loan she made with a place called "CashCall." Apparently she made the loan for $2,300. Although she made payments of more than $200 per month for the past year, she recently discovered the balance owed is now $2,800 -- more than the original loan amount.
I went to the Web site, ..... , and found that the interest rate was 96 percent. That's not a typo. They really mean 96 percent!
Is it legal? I fail to understand how. I'm from Boston, and even the Mafia didn't have interest rates this high.
-- L.U.
Answer: Horrifying as it may sound, that interest rate is legal.
Because CashCall Inc. and other so-called finance lenders don't take deposits like a bank, their assets are not federally insured or regulated by federal banking laws. They are, however, licensed by the state Department of Corporations and adhere to state regulations.
CashCall is one of 4,350 finance lenders licensed in California that offer quick, "convenient" personal loans typically requiring little paperwork. Unlike a bank, they often can set up a loan with only a driver's license, proof of employment (or income) and a copy of a voided check from your banking account.
Because the loans are unsecured -- that is, they're not backed by a car, a home or other collateral -- they're considered risky for lenders, which is why the interest rates are so high.
On loans less than $2,500, the state limits the allowable interest rate to 30 percent, according to Department of Corporations spokesman Mark Leyes. Loans of $2,500 or more are not subject to caps on interest rates (but are required to meet other restrictions.)
"In those cases, it's 'buyer beware,'" said Leyes. "That's always the case, whether it's the biggest bank in the world or a storefront lender."
While interest rates like your daughter's sound astronomical, they are plainly stated on CashCall's Web site, ...... For a $2,600 loan, the basic interest rate is listed as 96 percent. Sound unbelievable? The annual percentage rate is even higher: 99.25 percent. That's based on 42 payments of $216.55 per month.
What those stats don't mention is how those modest-sounding $216 monthly payments actually pencil out: To pay off that "convenient" $2,600 loan at CashCall's rates, you'll pay a whopping $9,095. Ouch.
The company, based in Southern California's Fountain Valley, advertises widely, promising "thousands in your checking account in a day" in most cases. Its memorable TV commercials -- featuring former child actor Gary Coleman as pitchman -- pop up on YouTube.
And while Web sites like the Ripoff Report are rife with complaints about CashCall's lending and collections practices, the company is not violating lending laws, according to the Department of Corporations.
"As far as we can tell, they comply with the law by disclosing their terms on the Web site," said Leyes, as well as meeting other licensing requirements such as paying an annual $250 fee and maintaining a $25,000 surety bond.
The department has received some formal complaints about CashCall in the past and "we investigate every one," said Leyes, adding that he was unaware of any current investigations.
In recent weeks, CashCall appears to have suffered some of the same fallout afflicting the subprime mortgage market. In August, the company halted out-of-state loans to consumers, the Los Angeles Times said.
Efforts by The Bee to reach CashCall executives were unsuccessful. But a CashCall customer service representative said Monday the company has resumed making $10,000, $5,000 and $2,600 loans to California customers. Leyes said the state was aware of CashCall's disruption in service and would be monitoring the situation.
Consumers with questions or complaints about any finance lender can call the state Department of Corporations at (866) 275-2677 or go online: www.corp.ca.gov/comp/complist.htm |
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volleyballmom
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Posted: Tue Oct 02, 2007 9:35 pm Subject:
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WOW!! Those rates are crazy!! How are these companies even legal??
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lawn1016
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Posted: Wed Oct 03, 2007 12:24 am Subject: Cash Call
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Yep...very crazy!! Once you're into the 'cycle', with CC, it's hard to get out....that's for sure!!
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sdchargers_63
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Posted: Wed Oct 03, 2007 5:37 am Subject:
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lawn-It explains in the article how the rates are lega...it more like "how can these people sleep at night"
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volleyballmom
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Posted: Wed Oct 03, 2007 5:41 am Subject:
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Volley, Great post.I do wonder how these people sleep at night.This article explains it all, and it is a bit scary.
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kashzan
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Posted: Wed Oct 03, 2007 5:55 am Subject:
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If I read the article correctly; State of Calif governs loans under $2500 to 30% apr. It appears that Cash Call's lowest loan is $2600 - just over the amount governed by law - how convenient !!!!
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hvn_sent
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Posted: Wed Oct 03, 2007 6:43 am Subject:
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Of course - That's one of the reasons Cash Call is the actual lender in California. In other state's that have caps on interest rates, they are backed by First Bank of DE to get around them. But in state's that allow it, California, Idaho, New Mexico, and Utah, Cash Call is the actual lender. And like this article said, they are legal. It's interesting to note that they said the CA DFI has investigated several complaints against them and has found no wrongdoing yet . . . . . I hope that the class action suit fares better.
This is a great article! Awesome find!
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goudah2424
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Posted: Wed Oct 03, 2007 7:40 am Subject:
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Thanks Goudah! I thought it was rather timely as well....
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volleyballmom
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Posted: Wed Oct 03, 2007 11:49 am Subject:
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If I only knew then what I know now. Goudah would it to my benefit to check my state and see if it caps the interest. On the web it says KY is backed by First Band DE but I am under cashcall not FBD. Do you think It would make a difference for me.
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RoxyNY
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Posted: Wed Oct 03, 2007 12:00 pm Subject:
Latest Blog Post : http://Punkteri.yesdebtfree.org |
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Unbelievable!!! There should definately be a law against charging that much! They just prey on desperate people, it is so unfair.
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Punkteri
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Posted: Wed Oct 03, 2007 10:40 pm Subject:
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It is absolutely unfair!!!
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volleyballmom
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Posted: Thu Oct 04, 2007 6:58 am Subject:
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What do you mean Roxy? Cash Call would still service the loan for 1st Bank of DE. All your contact would be with Cash Call, it's just that the actual lender is the 1st Bank of DE. The loan is still underwritten by the 1st Bank of DE, so they are legally the lender regardless of who services the loan.
In a way it's like this - Those that live in state's where Cash Call is the lender would be dealing with Cash Call itself. Those in the state's where 1st Bank of DE is the lender borrow from the 1st Bank of DE a loan product called Cash Call. 1st Bank of DE will contract with Cash Call to service the loan for them. It's kind of the same thing as with Think Cash, or Purpose Loans. They are also backed by the 1st Bank of DE, but everything the customer sees is Think Cash, or Purpose Loans.
I don't know if that made sense or my rambling just confused the subject further . . . .
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goudah2424
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Posted: Thu Oct 04, 2007 8:17 pm Subject:
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Calif Dept of Corp did call me back and I'm playing phone tag with them right now. My take on it is that yes, I was stupid enough to sign the paperwork so I am on the hook for it, but what I want to hang them for is their collection tactics, which I think are disgusting.
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kscornell
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