“Predatory” loans to buy pets have an interest rate of 189%, despite state laws

An Iowa couple who unwittingly bought a critically ill dog on a loan with an 189% interest rate now wants lawmakers to protect consumers from a similar experience.

Jeff and Jennifer Bowman, whose story was first reported by The Washington Post, purchased a 12-week-old English Bulldog from a Petland store in Iowa City three years ago.

The price for the pup, which they later named Zeke, was $4,400. “They told us the price and I almost fell on the ground,” recalls Jennifer Bowman. The couple hadn’t planned on spending so much money on a new dog, but with Zeke, she says, it was “love at first sight.”

“They put us in a little room where we could sit with Zeke and he could run around, and we fell in love with him,” Jeff Bowman said.

Adding taxes, a $300 “returning supplies kit” and an Iowa Hawkeyes dog collar, the Bowmans owed Petland a total of $5,001.07. The couple deposited $500 and, with the help of Petland staff, they signed papers financing the rest of the purchase through two separate loans, one for $1,500 and the other for 3. $000.

A Petland clerk warned the couple of the interest rate they would face if they did not repay the $1,500 loan within 90 days.

“They said, ‘Try to pay because after a certain point the interest rate is going to skyrocket,'” recalls Jeff Bowman. “But we didn’t know how much it would increase.”

Rent-a-bank loans avoid state interest caps

Although Iowa interest rates are capped at 36%, the Bowmans later discovered that the $1,500 12-month loan, issued through a company called EasyPay, stipulated that they did not repay the loan within 90 days, an interest rate of 188.98% would be applied to the loan.

The loan documents, which include a disclosure statement from the federal Truth in Lending Act, clearly set out the precise terms of the agreement – ​​showing the Bowmans would have to pay $1,827 in finance charges to borrow $1,500 , for a total refund of $3,327. EasyPay would automatically withdraw $128 from the couple’s bank account every two weeks.

But that statement was one of many filed with the Bowmans that day, and the couple were more focused on Zeke than on the terms of the loan. Additionally, they were unaware that Zeke had serious health issues that would result in multiple and costly visits to the vet, which would impact their ability to repay the loan.

The higher interest rate was made possible by EasyPay processing the loan through Utah-based Transportation Alliance Bank. It’s a process that animal welfare and consumer advocates call “rent-a-bank,” and it allows finance companies like EasyPay to route loans through federally regulated banks in out of state who do not have to conform to interest rates. ceilings set by the States.

The National Consumer Law Center says these “predatory” practices have resulted in hundreds of complaints.

Among them:

– A New Jersey consumer who purchased a Cocker Spaniel and was charged 152% interest, five times the New Jersey legal limit of 30%.

— A Georgian consumer who complained that the pet store did not tell her that EasyPay’s finance charge amounted to an interest rate of 180%. “My pup was supposed to be $2,500 (and) is now almost $7,000.”

– A Florida consumer who said he ended up with damaged credit after buying a puppy that immediately fell ill and eventually died. “I only borrowed $2,200…I owe $5,500 on my credit report, due to interest,” complained the consumer.

– Another Florida consumer purchased a Shih Tzu puppy that died after the family incurred $1,280 in veterinary bills. After the pup died, a debt collector kept calling to collect on the loan.

Last year, Congress passed a resolution repealing a Trump-era rule that was enacted by the Office of the Comptroller of the Currency that facilitated such lending.

“In many states, these lenders are controlled by caps on the amount of interest they can charge,” President Joe Biden said as he signed the resolution. “But some loan sharks and online lenders have figured out how to circumvent these limits…using a partnership with a bank to avoid the state cap and charging outrageous interest – some as high as 100% interest, which is staggering… The last administration let it happen, but we won’t.

Eliminating the OCC rule hasn’t stopped the process of leasing a bank — and proponents say further action by the Federal Deposit Insurance Corp. and Congress are still needed.

A coalition of consumer groups, including Public Citizen, the Public Interest Research Group and the Consumer Federation of America, have petitioned the FDIC, which regulates banks. The groups are urging the agency to end the practice of banks serving as “fronts” for companies they view as predatory lenders.

Earlier this year, they wrote to the FDIC and said, “FDIC-supervised banks are helping predatory lenders make loans up to 225% APR that are illegal in nearly every state…Bank Lease Programs have thrived in FDIC banks for the past few years, and it’s time for that to end.

Zeke dies, but collection agencies keep calling

The Bowmans say the financial impact of the loans for Zeke was significant. “We almost lost our home,” Jennifer Bowman said.

When the couple realized the interest rate they would face if they didn’t rush to pay off the EasyPay loan, they enlisted the help of Jeff’s mother, who paid off the balance using a credit card with a much lower interest rate.

As difficult as it was, it pales in comparison to the emotional and financial problems that Zeke’s health issues caused the couple.

“It wasn’t until a few days after we brought him home that he started bleeding from his hindquarters,” Jennifer Bowman said. A series of diagnostic tests would eventually show that Zeke had Giardia, an intestinal infection caused by a microscopic parasite. Further tests by a specialist showed that Zeke had an abnormal kidney and was unlikely to reach the age of 5.

“It was terrible,” Jennifer Bowman said. “I used to take him to puppy training classes, but he couldn’t play too long because he was getting exhausted. It was so hard to watch because he was so full of life and he wanted to play. He was the best dog – so happy.

In February 2021, Zeke died of kidney failure at the age of 20 months, with veterinary records describing a number of physical issues including a history of allergic skin disease, gastrointestinal complaints and respiratory issues. A veterinarian later said Zeke’s death was a direct result of his “genetic and breeding history”.

The breeder has a history of violations

American Canine Association records of Zeke indicate he was born at Twin Birch Kennels, a kennel run by Lavern and Marietta Nolt of Charles City. The kennel has a history of regulatory issues, according to U.S. Department of Agriculture records.

The kennel’s last USDA inspection, in June, found several violations, including failure to provide adequate veterinary care to four English Bulldog puppies who had weak hind legs, and failure to maintain adequate identification and veterinary records.

In February, similar issues were noted by a USDA inspector who reported that several Twin Birch dogs were not receiving adequate care, including a bulldog with a “big red growth” covering a third of its right eye. “The dog has not been evaluated by a veterinarian,” the inspector said, and the kennel did not intend to have the condition diagnosed or treated.

Petland officials reimbursed the Bowmans in full for the purchase price of Zeke, less finance charges, and some of the couple’s veterinary bills. After Zeke’s death, the Bowmans stopped paying the second of two loans they had obtained through Petland. To this day, Jennifer Bowman said, they continue to receive calls from a collection agency and their credit rating has taken a hit.

Federal legislation is stalled in Congress

In 2019 and 2021, a bill was introduced in Congress to provide a permanent national solution to the rent-a-bank problem by establishing a 36% interest rate cap that would apply to all lenders. But this proposal has met with strong opposition from the financial sector and has not yet been approved by Congress.

With federal action stalled, some states have taken action. Illinois banned high-interest loans, and California now prohibits online pet stores, regardless of their physical location, from assisting with the financed purchase of dogs, cats or rabbits.

As for EasyPay, the company acknowledges that its interest rates can reach 199%, but says it makes financing an option for people who otherwise wouldn’t even qualify for a loan.

“Many Americans are being left behind by the traditional banking and credit system,” the company told The Washington Post. “EasyPay facilitates financing options to ensure that these consumers have a reliable and secure choice to access otherwise unavailable credit for urgent needs and discretionary purposes.”

Elizabeth Kunzelman, Petland’s vice president of legislative and public affairs, said the Bowmans were “fully reimbursed” for the purchase of Zeke and the store “went beyond the warranty, even returning to the breeder. to make sure the sire and dam weren’t ‘I haven’t bred again’, then the store stopped buying from that breeder.

As for the Bowmans, they now have a new dog — one acquired from a friend, not a dealer — but they still want others to know about Zeke and the financial and veterinary risks associated with puppy mills and pet financing. company.

“We reached out to the Better Business Bureau, the US Department of Agriculture, the Attorney General’s office — all of them,” Jennifer Bowman said. “We tried to get Zeke’s story out there just so another family wouldn’t go through what we went through.”