December 3, 2023

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Man slammed with triple digit interest rate on loan

OKLAHOMA CITY (KFOR) – With rising inflation more Oklahomans are having a hard time paying for basic needs.

To make ends meet, many are turning to quick, online payday loans, but in some instances, the payback terms are shocking.

One Oklahoma City man told KFOR when his car broke down last summer, he couldn’t afford repairs.

The auto repair company he was using helped him get an on-the-spot loan to get his vehicle fixed through a digital “lease-to-own” financing company, according to its website.

Snap Finance, LLC is a lease-to-own financing service based in Salt Lake City, Utah.

KFOR contacted the company to provide more context on their policies and structure for repayment but had not heard back at the time of this article’s publication.

Snap approves amounts from $250 to $5,000, according to it’s website, and applications can be made online,  a text-to-apply feature or with the help of a sales representative

The man said after months of payments, he still owes almost all of what he originally borrowed.

“I got approved very quickly, which definitely should have been a red flag,” he said, adding that while he initially believed that no interest would accrue as long as he paid off the loan within a hundred days, the interest actually accrued retroactively.

“They told me that [with] my principle balance, I only paid $82 and I asked them how that was possible. They told me it was a 186% interest rate.”

Triple digit interest rates sound outrageous but with certain terms, they’re legal, according to data from the National Consumer Law Center.

For a $500, six-month installment loan, 45 states and DC cap rates, at a median of 39.5%.

However, the maximum APRs allowed by the state of Oklahoma for closed-end installment loans is 204%.

Representative Mickey Dollens, D-Oklahoma City, said savvy marketing from online finance lenders makes repayment terms hard to spot.

Dollens said payday lending is very common in Oklahoma.

“You know, the online lenders have become very savvy in their marketing. They try to look innocuous as a way to save people who are barely making ends meet. Unfortunately, especially the online lenders, which can be even more predatory than the storefront payday lenders take advantage of people,” he said.

“So as a result, they have to resort to a predatory loan, [and] are shocked to find that at the end of the day, once after about six months has passed, they’ll look into it and find out that they owe more than they originally took out. Yet they’ve been paying on it every single month, usually twice a month, to come to learn that they’ve only been paying down on their interest and not the principal,” he continued.

“It’s an incredibly difficult financial situation that can destroy their finances for years, if not a lifetime,” he added.

Dollens has previously proposed legislation to protect Oklahoma consumers while adding more safeguards to payday loans and other practices that might be considered predatory.

“There is a solution at the legislative level, and that’s been proven by other states that have gone the extra mile to protect the citizens from predatory practices. Unfortunately, in Oklahoma, in this political landscape, that appetite isn’t there. But I’m going to continue pushing for it because it’s such it’s an issue that affects so many people,” he said.

As for the gentleman who needs to pay off his loan, he told KFOR there’s not much more he can do, besides pay the money off as fast as he can.

The original balance was around $1,000.

“If I continue to pay exactly what I’m paying right now, I might be able to get out from under it next August. But the interest is going to continue,” he said.

“I think that’s kind of the point of it, ” he added.

“I’m not going to be able to pay it off.”