Right now isn’t a great time to buy a new car or a used car, but sometimes it is unavoidable. Some people might opt for auto repairs instead of buying a new vehicle. With that said, Consumer Reports wants people to be aware of predatory car repair loans that could have you overpaying.
Consumer Reports wants you to avoid predatory car repair loans
Consumer Reports didn’t beat around the bush when naming names in a recent report. The shops listed are Jiffy Lube, AAMCO, Meineke, Big O Tires, Grease Monkey, Midas, and Precision Tune Auto Care. The brands mentioned earlier are in most cities around the U.S. Consumer advocacy groups, including Consumer Reports, found that some of these shops are charging customers up to 189% interest for basic car repairs.
Some states have limits to protect people from these predatory practices, but there are ways around it. By teaming up with a bank, a legal gray area allows repair shops to offer loans through a bank in Utah, where these limits do not exist. The “rent-a-bank” process uses EasyPay Finance and Transportation Alliance Bank (TAB) to circumvent the rules.
According to a survey done by AAA back in 2017, most drivers cannot pay an average car repair bill of $500 to $600. These predatory car repair loans target those who can’t pay such a bill. Higher rates make payments even harder to catch up on. A simple auto repair can turn into a mountain of debt.
Consumers have accused EasyPay Finance of offering predatory car repair loans
When auto repair shops partner with EasyPay Finance, there is an additional way to lure people in. If the customer can pay the loan within 90 days, it is interest-free.
“Loans at 189 percent are illegal in most states, but TAB Bank is helping EasyPay Finance evade those laws and multiply the pain of an expensive car repair.”Lauren Saunders | Associate director at the National Consumer Law Center
However, many customers have filed complaints against EasyPay Finance and its parent company in California. These complaints allege that the company makes it impossible even if customers attempt to pay off the debt early. Unexpected fees and added interest are tacked on to bump up the amount owed. One complaint noted that since he or she used the debit card to pay the loan application fee, the company charged it multiple times.
A spokesperson for Jiffy Lube International said that the company does not have a business relationship with EasyPay Finance. She also noted that third parties own and operate Jiffy Lube service centers. Similar statements were echoed by Midas and Big O. Consumer Reports didn’t hear back from some of the other companies listed.
Be sure to read any agreements before signing and get a copy of all paperwork
EasyPay Finance has been in the news for something similar before. In one situation, the company was offering loans for purebred puppies. Customers noted paying off the loans but being tracked down by the company for a balance. “Based on the many complaints filed by consumers, it is clear that many borrowers are shocked by the sky-high interest rates attached to these loans, and difficulties in successfully completing repayment,” Chuck Bell of Consumer Reports said.
To avoid getting caught in this kind of predatory car repair loan, Consumer Reports has some tips. Check through the loan before signing, looking closely at the interest rate details. The offer’s details should be reviewed, even if the company makes it hard to do so. If you can use a credit card or get a personal loan, that might be another solution. A credit card can offer protection, and a personal loan might have a more reasonable interest rate.
It is good to avoid a loan over 36%, which is the top rate for affordable loans. A company that goes above that rate might not be willing to work with customers down the line. Get a copy of any agreements signed as well.