‘Predatory’ loans to buy pets can carry 189% interest, despite state law

By Clark Kauffman, Georgia Recorder [This article first appeared in the Georgia Recorder, republished with permission]
October 19, 2022

An Iowa couple who unknowingly bought a seriously ill dog with a loan at 189% interest are now asking lawmakers to protect consumers from a similar experience.

Jeff and Jennifer Bowman, whose story was first published by the Washington Post, bought a 12-week-old English bulldog three years ago at Petland in Iowa City.

The price of the dog, which they later named Zeke, was $4,400. “They told us the price and I almost fell to the floor,” Jennifer Bowman recalled. The couple hadn’t planned to spend so much on a new dog, but with Zeke, she said it was “love at first sight.”

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

With taxes added, a $300 “homecoming supply kit” and an Iowa Hawkeyes dog collar, Bowman’s Petland owes a total of $5,001.07. The couple put down $500 and, with the help of Petland employees, signed papers that financed the rest of the purchase with two separate loans — one for $1,500 and one for $3,000.

A Petland employee 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 it off because after a certain point the interest rate is going to go up,'” Jeff Bowman recalled. “But we didn’t know how much it would grow.”

‘Rent-a-bank’ loans avoid state restrictions on interest rates

While Iowa’s interest rates are capped at 36%, the Bowmans later discovered that a 12-month $1,500 loan through a business called EasyPay carried an interest rate of 188.98% if the loan was not repaid within 90 days. will be applied to the loan.

The loan documents, which include a federally approved Truth in Lending Act disclosure statement, spell out the exact terms of the deal — showing the Bowmans had to pay $3,327 in finance charges to borrow $1,500. EasyPay automatically withdrew $128 from the couple’s bank account every two weeks.

But that disclosure statement was one of several documents put before the Bowmans that day, and the couple focused more on Zeke than the terms of the loan. In addition, they did not know that Zeke had serious health problems that would lead to multiple, expensive trips to the vet, which would affect their ability to repay the loan.

The higher interest rate is made possible by EasyPay processing the loan through Utah-based Transportation Alliance Bank. It’s a process animal welfare and consumer advocates call “lease banking,” which allows financial companies like EasyPay to channel loans through out-of-state, federally regulated banks that don’t have to comply with interest rates. caps set by states.

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

Among them:

— A New Jersey consumer who bought a cocker spaniel and was charged 152% interest, five times the New Jersey legal limit of 30%.

— A Georgia consumer charged a 180% interest rate after complaining that a pet store didn’t tell him EasyPay’s finance charges. “My puppy was supposed to cost $2,500 (and) now it’s almost $7,000.”

– A Florida consumer who says she was left with damaged credit after buying a puppy that immediately became ill and eventually died. “I only borrowed $2,200…I owe $5,500 on my credit report because of interest,” complains the consumer.

– Another Florida consumer bought a Shih Tzu puppy that died after racking up $1,280 in the family’s vet bills. After the dog died, the debt collector called to collect the loan.

Last year, Congress passed a resolution repealing a Trump-era rule put in place by the Office of the Comptroller of the Currency that made it easier to make such loans.

“In many states, these lenders are being scrutinized by the limits of how much interest they can charge,” President Joe Biden said as he signed the resolution. “But some loan companies and online lenders have figured out how to get around these limits … by partnering with a bank to avoid the state limit and charging exorbitant interest rates — some as high as 100 percent, it’s amazing … The last administration let it be , but we won’t.”

Eliminating the OCC rule didn’t stop the bank lease process — and attorneys at the Federal Deposit Insurance Corp. and say further action by Congress is still needed.

A coalition of consumer groups, including Public Citizen, the Public Interest Research Group and the Consumer Federation of America, sued the FDIC, which regulates banks. The groups are calling on the agency to end the practice of banks acting as “fronts” for businesses they consider predatory lenders.

Earlier this year, they wrote to the FDIC stating that “FDIC-supervised banks help predatory lenders make loans of up to 225%, which is illegal in nearly every state… Bank-for-hire schemes have flourished at FDIC banks in the past. It’s been a few years and it’s time for it to end.”

Zeke dies, but collection agencies keep calling

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

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

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

“A few days after we brought him home, he started bleeding from his rear end,” Jennifer Bowman said. A series of diagnostic tests would eventually reveal that Zeke was suffering from Giardia, an intestinal infection caused by a microscopic parasite. Further examination by a specialist revealed that Zeke had an abnormality in his kidney and would likely not make it to the age of 5.

“It was horrible,” Jennifer Bowman said. “I used to take him to puppy training classes but he didn’t get to play very much because he was just getting worn out. It was hard to watch him because he was so full of life and wanted to play. He was the best dog – so happy.”

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

Breeder has a history of violations

Zeke’s American Kennel Association records show he was born at Twin Birch Kennels, operated by Lavern and Marietta Nolt of Charles City. The kennel has a history of regulatory problems, according to U.S. Department of Agriculture records.

The USDA’s most recent inspection in June noted a number of violations, including failure to provide adequate veterinary care and adequate identification and veterinary records for four English bulldog puppies with weak hind legs.

In February, similar issues were noted by a USDA inspector who reported that several dogs at Twin Birch, including a bulldog with a “huge red growth” covering a third of his right eye, were not receiving proper care. “The dog was not evaluated by a veterinarian,” the inspector said, and the kennel had no plans to diagnose or treat the condition.

Petland officials reimbursed the Bowmans in full for Zeke’s purchase price, minus finance charges and some of the couple’s veterinary expenses. After Zeke died, the Bowmans stopped paying the second of two loans they secured through Petland. Jennifer Bowman said to this day she continues to receive calls from a collection agency and her credit ratings have taken a hit.

Federal legislation has stalled in Congress

In 2019 and 2021, legislation was introduced to Congress that would provide a permanent, national solution to the “bank rent” issue by setting a 36% interest rate cap that would apply to all lenders. But the proposal has faced stiff opposition from the financial industry and has yet to be approved by Congress.

Federal action stalled, some states took action. Illinois has banned high-interest loans, and California already prohibits online pet stores from helping finance the purchase of dogs, cats or rabbits, regardless of their physical location.

As for EasyPay, the company admits its interest rates can be as high as 199%, but says it makes financing an option for people who wouldn’t otherwise qualify for credit.

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

Elizabeth Kunzelman, Petland’s vice president of legislative and public affairs, said the Bowmans were “fully refunded” for Zeke’s purchase, and the store “went above and beyond the warranty, even going back to the breeder to make sure the mother and dam weren’t bred again.” and then the store stopped buying from that breeder.

“The store decided to no longer use EasyPay in February 2021, prior to the updated consumer credit policy, because it was not satisfied with the terms the company provided,” Kunzelman said.

As for the Bowmans, they now have a new dog — one they bought 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.

“We contacted the Better Business Bureau, the U.S. Department of Agriculture, the attorney general’s office — just a lot of people,” Jennifer Bowman said. “We’re trying to get Zeke’s story out there so another family doesn’t have to go through what we went through.”

This story first appeared in the Iowa Capital Dispatch, the Georgia Recorder States Newsroom sister outlet.

The Georgia Recorder is part of States Newsroom, a network of newsrooms supported by grants and a coalition of donors as a 501c(3) public charity. The Georgia Recorder maintains editorial independence. For questions, contact Editor John McCosh: info@georgiarecorder.com. Follow the Georgia Recorder on Facebook and Twitter.

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