How Much Did You Really Pay for Your Puppy?

An interesting article in the Washington Post recently highlighted the high interest rates consumers are being surprised with after bringing home a puppy. Families who fell in love with dogs at certain pet stores were shocked to find out, after signing loan paperwork, that a $5,000 puppy would eventually cost $19,000 or more in the long run – not counting vet bills for existing medical conditions.

According to the Post story, “EasyPay Finance, a company that offers high-interest loans through pet stores across the nation, said they allow customers who might otherwise not qualify for a traditional loan to buy the pet of their choice. The company says its loan rates can be as high as 199 percent.”

That is a pretty outrageous interest rate. What is perhaps even more offensive, is that these lenders are preying on people and families making an emotional decision. For many, it is hard enough to walk through a puppy store without wanting to take every pup home. Often, parents have children tugging on their pant leg, eyes wide with excitement. Bringing home a puppy is a rite of passage for many families. It is, simply put, adding a new family member.

Per the Post:

Pet stores that sell expensive dog breeds have offered traditional financing options to customers for decades. However, loan companies acknowledge that the newer, high-interest loans are aimed at customers with no or poor credit. And customers and animal rights groups say the loans are pitched by sales staff as affordable by focusing on the cost for monthly payments versus the overall price of the dog. These practices have allowed pet stores to sell breeds that cost thousands of dollars — such as French bulldogs — at prices far higher than private breeders charge due, in part, to impulse buys as people browse pets.

It is hard to see how these types of loans aren’t totally taking advantage of consumers. Fortunately, there are many state consumer protection laws that protect families from these predatory lenders.

What is predatory lending?

In a nutshell, predatory lending benefits the lender at the borrower’s expense. The finance site NerdWallet offers a few tips on recognizing the red flags of potential predatory lenders:

• Does the loan seem too good to be true? Is the company offering you a great deal on financing despite a bad credit history? There’s likely a catch. Ensure you read the terms very carefully.
• Was it way too easy to get approved? If you weren’t given a credit check before getting approved for your loan, there’s probably something amiss. Skipping a credit check typically means astronomically high interest rates – often well over 100% APR. This can make it almost impossible to pay back.
• Did they disclose the interest rate? It should be easy to find the interest rate of your loan. If the lender makes it hard or even impossible to find up front before you sign, consider that a warning. The Post article mentioned interest rates of nearly 200% on EasyPay loans. Consumer advocates recommend rates under 36%.
• The lender has a history of complaints. Always investigate a lending company before signing on with them to ensure they’re consumer-focused. Per NerdWallet, check “the Better Business Bureau and see how many complaints are registered against the company. Look for the lender’s name among the Federal Trade Commission’s scam alerts. Finally, check the Consumer Financial Protection Bureau’s complaints database.”
• Your only payment option is auto-withdrawal. Although most companies can give you the option of auto-withdrawal, it shouldn’t be your only Your lender cannot demand access to your bank account, and it’s not a good idea to let them withdraw money and potentially cause you unnecessary overdraft fees.

Your rights as a borrower

You have a variety of rights as outlined under the 1985 Credit Practices Rule. Under these rules, lending companies cannot:

• Waive your right to be notified of a court hearing regarding a debt default
• Put provisions in a contract that force one to “relinquish legal protections of his home, possessions or wages against seizure to satisfy a judgment”
• Collect your future earnings or wages to cover a loan default
• Take your household goods to cover a loan default
• Pyramid late fees

The bottom line? Before you sign any paperwork for a puppy or finance a purchase, the most important thing is to understand the terms and the interest rate. If you have already entered into a high interest rate loan, you might consider contacting a consumer rights lawyer to explore your options.

Please contact Paulson & Nace, PLLC, through this contact form or by calling 202-463-1999.