Of those dozens of lenders, EasyPay is the only one operating in Massachusetts, with about 100 auto repair shops and a handful of pet stores offering its loans.
Here’s what’s going on:
Q. How does EasyPay work?
A. I spoke with two owners of auto repair shops that offer EasyPay, and one of them said he refused to do so because of what he called his “interest rates”. extremely high ”. (They asked not to be identified by name.)
The typical scenario is that of despair. The owner of a broken down car or truck gets an estimate of the cost of repairs, but cannot afford it. At this point, the store management informs the owner of EasyPay.
A loan can be arranged in a matter of hours, completely online and via SMS. When the loan is approved, EasyPay makes a deposit covering the cost of the repairs directly to the store owner’s bank account (less a 2.99% fee).
EasyPay says on its website that loans are available “whether you have good credit or no credit” and without putting any money.
Q. What does EasyPay require from applicants?
A. A cell phone, email address and bank account for pre-authorized direct debits. Applicants must have at least $ 750 in income per month, according to the EasyPay website. (EasyPay did not respond to my repeated emails and calls asking for comment.) Loan amounts range from $ 350 to $ 5,000.
Q. Can the loan be prepaid?
A. Yes. EasyPay promotes a feature that allows borrowers to pay off their loans within 90 days without interest (a $ 40 processing fee is required). But borrowers who are in such a difficult financial situation that they accepted EasyPay’s draconian terms in the first place may find it impossible to do so.
Q. What are EasyPay’s interest rates?
A. As part of my research, I called EasyPay as a regular prospect. I’ve been quoted interest rates ranging from 35.7% to 189%, depending on my credit history. One of the auto shop owners I spoke with said that most of the loans he was aware of were high-end loans.
Q. How much are the monthly payments on a loan maturing at 189 percent interest?
A. On a six month $ 500 loan, the monthly payments would be around $ 135 and the total interest would be close to $ 310. For a $ 2,000 24-month loan, the monthly payments would be around $ 325 and the total interest would be almost $ 5,800.
Q. Doesn’t Massachusetts ban very high interest rates?
A. Yes, the state caps interest on a six-month $ 500 loan at 37%, according to data compiled by the National Consumer Law Center. Under these terms, the monthly payment would be $ 93 and the total interest would be $ 55.
On a 2 year loan of $ 2,000, the limit is 24%. Under those terms, the monthly payment would be around $ 106 and the total interest would be $ 538, according to the CLB.
But someone who borrows $ 2,000 for two years from EasyPay at their highest rate would pay more than 10 times as much interest as the state of Massachusetts allows.
Q. How does EasyPay circumvent Massachusetts law?
EasyPay is affiliated with a bank and a state does not have the power to regulate a bank based in another state. The NCLC and other critics say the affiliation is a sham that allows lenders like EasyPay to sidestep the law.
EasyPay is affiliated with Utah-based TAB Bank, according to recent testimony to the Senate Banking Committee. In her testimony, Lisa F. Stifler, of the Center for Responsible Lending, said that TAB Bank “helps EasyPay Finance make predatory loans. . . pets, auto repair and other products. (TAB declined to comment.)
Q. What does “rent a bank” mean?
A. This is when a non-bank lender that would otherwise be subject to the interest rate cap of an affiliated state bank “on paper” in an attempt to circumvent the limitation. The bank is said to “rent” its name from the real lender for use in loan documents.
Q. Why is this getting the attention of Congress now?
A. In the past, courts have allowed law enforcement agencies, such as state attorneys general, to investigate agreements between non-bank lenders such as EasyPay and banks to determine who is the “True lender”, whatever the documents say.
If the loan is made in the name of the bank, but the non-bank lender provides the capital, assumes the risk, and takes back ownership of the loan after it is consumed, the courts have allowed state usury laws to apply.
But under the Trump administration, the agency that regulates national banks enacted a rule that law enforcement agencies could no longer look beyond what loan documents say. If the documents indicate that the bank is the lender, no further investigation is allowed, under the new rule.
Q. What is happening in Congress?
A. On May 11, the Senate voted 52 to 47 to overturn the Trump administration rule. (The vote was bipartisan, with three Republicans joining Democrats in favor.)
Q. What happens next?
A. The Chamber is considering a bill to do the same. It’s now up to the House Financial Services Committee. A vote in the plenary chamber could take place at any time.
Q. What would this mean for EasyPay in Massachusetts?
A. Attorney General Maura Healey’s office enforces state interest rate caps. “We are familiar with EasyPay Finance and are very concerned about its reported practices,” the GA office told me last week.