Beware of credit card with 96% APR

GRAND RAPIDS -- A 24 Hour News 8 viewer received a loan offer at 96 percent apr and wanted to know if banks could charge that kind of interest.

"When I read through this letter it just really appalled me. It really made me irritated," Kenneth Stangle Jr. told 24 Hour News 8.

The offer was not a typo.

He received the unsecured loan offer from Brookwood Loans of Sioux Falls, South Dakota last week.

"The interest rate on this is just unbelievable. To me, I think it's loan sharking. It's almost highway robbery," adds Stangle.

The unsecured loans available are relatively small - $1,000 to a maximum of $3,000. But at 96 percent APR, that $3,000 loan with 24 monthly payments of $284.93 comes out to a payback of $6,838.32.

"You know, when you're desperate I think people will say, 'I need this money,'" said Julie Bos, a credit counselor with Greenpath debt solutions.

"This kind of stuff is very dangerous. Even though they say they're unsecured, they're going to ask for the title to your car. They want to put a lien on your vehicle or some sort of collateral so you repay this debt."

"I think the state of Michigan shouldn't allow this in this state," said Stangle.

But it does. It is legal for out-of-state lenders to make these types of loans available.

24 Hour News 8 checked with the former president of the Michigan Association of Credit Counselors who said there is no ceiling when it comes to out-of-state unsecured loan offers.

The need to legislate is up for debate.

"Some people will say that if there is an interest rate ceiling, you're taking away the ability for some people to get loans who have poor credit," said Bos.

With a sagging job market and a growing number of foreclosures, Stangle believes this type of loan is too tempting for folks who can't afford it.

"It's just taking advantage of people who need money right now."

Michigan banks are regulated. There is a ceiling when offering unsecured loans - an approximate APR maximum of 13 percent.

So how do they know who to send these offers to?

24 Hour News 8 found out these type of lenders buy what are called "turn-down" lists - the names and addresses of people who have tried to get loans, but because of bad credit have been turned down.

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