Thoughts on this transaction?
Date: Tue, 11/18/2008 - 09:10
Therefore, as I read the law the maximum interest rate that they can validly charge me is 18% per annum plus a $25 fee. However, on the "Promissory Note/Loan Agreement," it states that the annual percentage rate is 385.52%.
To date I have paid $650 on this loan; by my math this is more than the legal amount due. Am I missing something? How much do I legally owe them?
Thanks for your help! I am not much of a math whiz...
Hi, I'm not sure how CSO's operate, but I wanted to acknowled
Hi,
I'm not sure how CSO's operate, but I wanted to acknowledge your post. Someone who does should be along to help.
CSO's operate in Texas, Florida and Maryland. In those states a
CSO's operate in Texas, Florida and Maryland. In those states an unlicensed lender can charge up to 10% annual interest and a loan "broker" (or Credit Services Organization) can charge any fee a consumer is willing to pay. Since Texas and Maryland don't allow storefront loans and Florida is very restrictive, a lot of lenders use this model instead. The way it works is the CSO markets the loan and does all of the other functions of a payday lender. An investor (which must be a separate business or individual) actually funds it at the 10% interest rate. (Usually you only find out who they are on the loan paperwork.) The broker guarantees the loan so a lot of traditional investors, even pension funds, see it as a safe investment. Meanwhile, the CSO charges a hefty brokering fee that is either deducted from the loan (meaning you only get, for example, $350 but are paying on a $500 loan) or is paid directly by the borrower over time.
