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This is how people who don't understand (or read agreements) get trapped, what a gimmic!


nyrfann
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The title should be but I cannot edit it: This is how people who don't understand (or don't read agreements) get trapped, what a gimmic!

 

So we are doing some renovations on our house, one of the things we are doing, or I should say is now done is our roof. Anyway the roof cost just under 14K. At the time the roofing company was offering a no payment, 0% for 12 month offer so of course I go for it, approved instantly for a line of 20k. As the lady was reading the terms to me I was stunned at what she said, actually did not believe what she said at 1st but in fact she was correct as I studied the documents.

 

So as stated the loan is for up to 20K (you use what you need within a 4 month period). The clock starts running with the 1st charge and from that point you have 12 months of no interest and no payments, so in my case the 1st charge was 9/1/2015 so I have until 8/31/16 to pay and not incur any interest.

 

BUT here is where is gets crazy: If there is any balance left on 9/1/2016 not only do you get charged the accrued interest for 2015-2016 you are locked in AUTOMATICALLY to an 84 month payment term on the balance and you cannot pay early unless you pay the full balance PLUS 84 months of interest. So for those of you that don't understand what I am saying. Let’s assume I took the full 20K out (using this amount since the pic below shows the details) and I pay nothing against it the 1st year. On day 366 the loan automatically converts to an 84 month installment loan that cannot be paid early unless you pay the original 20k PLUS $18,897.88 of interest that would accrue over the 84 months for a whopping total of $38,897.88.

 

I do credit for a living, I've seen many agreements but have NEVER come across anything like this, it’s almost criminal. I feel bad for the people needing a loan and either not fully understanding the loan or just forgetting to pay or procrastinating because in the end you can really get screwed.

 

Loan_zpssurcnplo.jpg

 

This is a summary of the plan:

 

Promotion Details
Plan 3128. 84 payments. Beginning with 1st transaction, 12 month promo period with no payments required followed by 84 amortized payments based on the balance at the end of promo. Interest charged to account is waived if entire purchase balance is paid before the end of promo period. No prepayment penalty. APR stated in your loan agreement fixed for life of loan.
Edited by nyrfann
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Those terms are a perfect example of legal loan sharking. What's *Admin removes vulgarity*ed up, is it almost makes payday loans and title loans not look so bad. lol. I bet if you faxed those terms over to First Premier or Credit One......they would be jealous.

Edited by TheVig
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it says:

 

prepayment: if you pay off early you will not be charged a penalty and may be entitled to a refund of part of the finance charge.

 

they aren't locking you in for 84 months.

 

that truth in lending is a gov't required disclosure to let people know how much they're actually paying if they just do the plan.

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Wait ... Am I missing something? This is a No Pre-payment Penalty Contract.

 

There is disclosure in the FedBox that states "If you pay off early, you will not have to pay a penalty", isn't there?

 

What's on the back of the contract? Should be something called "You may prepay" under "FINANCE CHARGE AND PAYMENTS" somwhere.

 

There should be something that reads similar to this:

 

"You may prepay all or part of the unpaid part of the the amount financed at any time without penalty.

If you do so, you must pay the earned and unpaid part of the finance charge and all other amounts

due up to to the date of your payment"

 

If you see that anywhere then legally you are allowed to pay this contract early at any time and the remaining interest is waived.

Edited by fury1995
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I don't see anything in the partial T&C sheet you posted that "locks in" the payment schedule. Minimum payments are laid out and deferred interest becomes payable if the full balance isn't paid in 12 months. I've seen that before on some credit cards. It's squirrely. But I've rarely seen a lock in which is way worse, outside of real-estate conduit loans. Could you post that part of the agreement?

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it says:

 

prepayment: if you pay off early you will not be charged a penalty and may be entitled to a refund of part of the finance charge.

 

they aren't locking you in for 84 months.

 

that truth in lending is a gov't required disclosure to let people know how much they're actually paying if they just do the plan.

 

"May" It seems to imply that the finance charge is fixed and only upon early repayment will you receive the refund for such interest not earned by the bank. There is a few pieces of language that point towards the 17.99% only being chargable on outstanding amounts at the prevailing compound periods. This looks to be no different than say, Carecredit where if you lapse past the 0% interest period you are responsible for all interest accrued until then.

Edited by Zobelle
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All,

 

When I get home I'll get the other part of the contract up...I can assure you, the wording locks you in and the rep was very specific when she said the terms.

 

Keep in mind, interest in NOT considered a penalty.

Edited by nyrfann
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LOL... my post took longer to type.

 

Hey. You and shifter saw this too! We aren't asleep on CB!

 

Yep

 

I sign these types of contracts every day

 

and constantly get asked about pre-payment penalties.

 

I always point to the FedBox and disclosures..

 

From what I see it seems to be no different

 

and I'm guessing the "phone lady" got it wrong

 

as CSR's often do

 

and we're constantly reminded here..

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it says:

 

prepayment: if you pay off early you will not be charged a penalty and may be entitled to a refund of part of the finance charge.

 

they aren't locking you in for 84 months.

 

that truth in lending is a gov't required disclosure to let people know how much they're actually paying if they just do the plan.

 

^ this

 

That's just a TILA disclosure like the one you see on every credit card statement. You are not locked into any set term. It just shows how much you'd pay if you decided to take the entire 84 months to pay it off.

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This is a simple interest contract with deferred payment for 12 months.

 

Basically it's a 96 month loan at 17.99% and 365 days before first payment is due.

 

The disclosure is telling you that you will be charged no interest if you make payments starting approximately one month from the first purchase. If you do not pay the entire balance within 13 months of the first transaction, you rate will be "changed" to 17.99% and your payments will be based on that APR for the approximately balance of $20,000 for the remaining 83 plus 1 months.


FYI the discolure (FedBox) is just breaking down all the payments for the entire 96 months..

 

12 months

83 months

1 (final) month

Edited by fury1995
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All,

 

When I get home I'll get the other part of the contract up...I can assure you, the wording locks you in and the rep was very specific when she said the terms.

 

Keep in mind, interest in NOT considered a penalty.

 

Thanks. That's what we need to see. If that's the case it really should be disclosed more clearly on the main T&C.

 

Reminds me of my parent's home loan taken out in the late 50's. 15k 30 year. Back then you just got 360 payment cards to send in. One each month. They hated debt and would send in multiple payments whenever they could. They sent that last one in about 10 years early. Six months later they got a big, fat check. They had no idea that interest accrued only on the balance and that paying it early would save money. They were bright people but just had no idea how money works.

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All,

 

When I get home I'll get the other part of the contract up...I can assure you, the wording locks you in and the rep was very specific when she said the terms.

 

Keep in mind, interest in NOT considered a penalty.

 

 

Never came back...

 

I'm curious to know what the rest of the contract actually stated.

 

Well, I hope he's ok. He clearly believed it locked in the installment timetable but I don't see anything of that sort in the page he posted. Well, I've misread stuff before too.

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  • Admin

This is a simple interest contract with deferred payment for 12 months.

 

Basically it's a 96 month loan at 17.99% and 365 days before first payment is due.

 

The disclosure is telling you that you will be charged no interest if you make payments starting approximately one month from the first purchase. If you do not pay the entire balance within 13 months of the first transaction, you rate will be "changed" to 17.99% and your payments will be based on that APR for the approximately balance of $20,000 for the remaining 83 plus 1 months.

FYI the discolure (FedBox) is just breaking down all the payments for the entire 96 months..

 

12 months

83 months

1 (final) month

+1 The contract is a RISA, That is how the disclosures have to be made in the Fed Reg Z box. No interest if paid in 12 months. Pull your pants down, if you go over that. :angel:

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