NPR has been investigating the scammy world of subprime lease-to-own smartphone contracts targeted at low-income markets. Here’s an excerpt:
NPR visited six MetroPCS locations that offer SmartPay and called a dozen more, and their representatives made the same 90-day pitch — even though many customers don’t qualify for it.
Atchley doesn’t have a lot of spare cash, and he wanted out. He couldn’t return the phone for a refund to MetroPCS because, he says, he had already talked on it for over an hour. And when he called a Better Finance, their rep didn’t help either, he says.
Atchley and 231 other SmartPay customers have filed complaints with the Better Business Bureau and five have filed with federal regulators, consistently saying they were misled.
Update at 3:44 PM ET: Dave Weigel has also just published a piece on a related topic: abusive subprime auto lenders and their political influence. There is a much more detailed report in yesterday’s New York Times Dealbook on the dangerous world of car title loans to low-income folks.
A review by The New York Times of more than three dozen loan agreements found that after factoring in various fees, the effective interest rates ranged from nearly 80 percent to over 500 percent. While some loans come with terms of 30 days, many borrowers, unable to pay the full loan and interest payments, say that they are forced to renew the loans at the end of each month, incurring a new round of fees.
Customers of TitleMax, for example, typically renewed their loans eight times, a former president of the company disclosed in a 2009 deposition.
[…] roughly one in every six title-loan borrowers will have the car repossessed, according to an analysis of 561 title loans by the Center for Responsible Lending, a nonprofit in Durham, N.C.
As a side note, I’ve also just blocked 19 categories of credit & lending advertising on this site because I noticed predatory ads showing up next to this post unfortunately. Hopefully those go away quickly.