Costly Cash: How a Retiree Wound Up With a 375% Loan

[Omaha Steve]

http://www.dailyfinance.com/story/credit/costly-cash-how-a-retiree-wound-up-with-a-375-loan/19378471/?icid=main|aim|dl3|link1|http%3A%2F%2Fwww.dailyfinance.com%2Fstory%2Fcredit%2Fcostly-cash-how-a-retiree-wound-up-with-a-375-loan%2F19378471%2F

By PALLAVI GOGOI Posted 11:00 AM 03/09/10

Last September, a pressing family matter led 63-year-old Preston White to walk into the Cash Store in Killeen, Texas. The retiree's daughter had just returned from serving in Iraq and had asked for some financial help relocating her family.

White couldn't say no, even though he didn't have the money. It had all gone to pay medical bills for the surgery and treatment of his wife's pancreatic cancer. He had spent all his retirement savings and even the money from selling his home in Virginia.

"We were able to overcome cancer, but it had a real impact on us economically and took away all that we worked for all our lives," says White. Today, his wife, a retired school teacher, is cancer-free and continues to visit her doctor for regular scans. But White wanted to help his daughter settle down. So, he went to the local First National Bank for a $5,000 loan. He was rejected.

That's when he took his 2003 Chevrolet Avalanche pickup (pictured, with White) to the Cash Store near his home and used it as collateral for a one-month "auto-title loan" of $5,000. However, he got only $4,000 in cash, but ended up owing more than $5,000, because of fees and charges that were tacked on. According to the loan document written by the Cash Store, White would owe the lender $5,268.50 at the end of the month. The costs included a fee of $1,200, a lien fee of $28, and finance charges of $40.50. According to disclosures in the document, the cost of White's credit at an annual percentage rate was 375.12%.

The Cash Store manager in Killeen, Veronica (who wouldn't provide her last name), declined to explain the details of White's loan. The chain of 280 stores in about eight states is operated by a private entity called Cottonwood Financial, based in Irving, Texas. A company spokesman, Jared Smith, also declined to answer questions about the loan.

A Rude Awakening

Despite the terms, White was happy to get the loan, and he wired the money to his daughter. Before the end of the one-month period, White decided to pay back part of the loan and went in with $1,300 in cash. That's when he got a rude awakening. The Cash Store told him he'd have to repay the entire amount. He could make a partial payment, but he would have to take out another one-month loan, which would come with the same fees and finance charges totaling over $1,250. White realized he could pay about $1,300 for months and still owe close to the original loan amount of $4,000.

FULL story at link.

[The Magistrate]

1. They Call This 'Vigorish', Sir, In My Old Haunts....

People could get ten to twenty for collecting it....