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Charlene Crowell is a senior fellow with the Center for Responsible Lending.
Charlene Crowell
Published: 19 May 2022

New research reveals how costly car repairs are now ballooning into a new form of predatory lending. And just like other forms of financial exploitation, consumers are feeling duped and deceived about related costs and the length of time it takes to pay off these bills.

stop the debt trapAuthored by Stop the Debt Trap, a multi-member consumer coalition, the report shares how national auto repair brands like AAMCO, Big O Tires, Grease Monkey, JiffyLube, Meineke, Midas and Precision Tune Auto Care, are steering people to a predatory lender that engages in a variety of questionable practices and charges up to 189% interest – even in states where triple-digit interest is illegal. 

“A car repair can be a devastating expense, and financially fragile families don’t need predatory lenders amplifying the damage,” said Elyse Hicks, Consumer Policy Counsel at Americans for Financial Reform, a member organization with Stop the Debt Trap.

“For most people, having a car that runs well is essential to their daily economic life and to managing a family.” 

Transportation Alliance Bank (TAB), one of a few rogue banks that lend their charters to help unscrupulous businesses evade state consumer lending laws, is the research report’s focus. The report details how TAB operates with its financial partner, EasyPay Finance, a subsidiary of Duvera Billing Services. Even in states that do not allow triple-digit interest rates, this financial alliance is making high-cost loans through stores nationwide, including auto mechanics and furniture. In other states, EasyPay extends credit directly in its own name, often as a retail installment sale. 

EasyPay Finance’s website acknowledges its lending through TAB Bank in multiple states, many of which also have significant consumers of color: Alabama, Arkansas, District of Columbia, Florida, Georgia, Illinois, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, South Carolina, Tennessee, and Texas. In these and other states, EasyPay may be operating under either the state’s lending statute or its retail installment loans act.  

As a result, hundreds of complaints from across the nation have been filed with the Better Business Bureau, Consumer Financial Protection Bureau (CFPB), and Ripoff Reports. 

In one of the most egregious consumer complaints in the report, a consumer maintained that a $1,500 repair bill exploded into a debt in excess of $7,000 and now appears as a past due item on a credit report: 

“Duvera Financial has been reporting my account as past due monthly although this account is in the collection phase. I have complained previously about predatory lending practices such as excessive calls and being harassed about a debt that I did not agree to. The interest rate and continuous fees were not explained to me properly and I feel that this lender should not be in business.

"The bill of $1500.00 has ballooned to over $7000.00.

"In this climate, those fees are ridiculous. In addition, the account is being reported as open and past due which is incorrect. Please remove this account from my credit report.”

Another CFPB complaint came from a Chicago military service member who already has remitted a total of $2,300 through 23 payments on a $1,500 loan. Even so, he still owes $1,300, due to its 151 percent interest. 

Consumer complaints

Other consumer complaints identified additional auto repair finance issues:  

  • Credit Applications taken over the telephone, or required to be completed on smartphones, with no written copies for consumers;   
  • Deceptive promises of full interest rebates if paid in 90 days, with numerous obstacles that prevent consumers from avoiding interest or knowing their pay-off balance;  
  • Unauthorized electronic debits that were different from the agreed payment, or continued after a payment plan was fulfilled; and  
  • Rude and unhelpful customer service and/or administrative errors that lead to missed payments, fees, and loss of the interest-free option. 

Consumer advice

In conjunction with the release of the Stop the Debt Trap report, the National Consumer Law Center issued an alert summarizing the growing issue and offering consumers specific advice to protect themselves: 

  1. Avoid any loan charging more than 36 percent annual percentage rate (APR)
  2. Alternatively, consider using a credit card. Credit cards provide protection if you have a problem with a purchase, and a low-rate loan obtained may be better than an interest-free offer from the auto repair shop that never materializes.
  3. Always check the terms of a loan before you sign or click, especially the interest rate, APR and any details of a promotional offer.  
  4. Always get a copy of any agreement signed. Make sure it is consistent with your understanding.  

 “Auto repair shops should stop driving their customers into a financial ditch,” said Rochelle Sparko, Director of North Carolina Policy at the Center for Responsible Lending, a member of the Stop the Debt Trap coalition. “The FDIC should stop TAB Bank, and other banks they supervise, from sponsoring this exploitative scheme,” she concluded.  

Charlene Crowell is a senior fellow with the Center for Responsible Lending. 

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