Small-Dollar Loans to Servicemembers, the Electronics Version (or an Easy Way to Get Around the Military Lending Act)
Yesterday the Consumer Financial Protection Bureau, along with 13 state attorneys general (including from my new home state of Indiana), announced a $92 million settlement and issued an enforcement action against Colfax Capital Corporation and Culver Capital, LLC, known as Rome Finance, for targeting military families (and other consumers) with predatory loans to buy electronics, such as computers and televisions.
Rome Finance would offer credit to consumers for the purchase of such electronics primarily at mall kiosks near military bases, promising instant financing and no money down. Rome Finance then jacked up the price of the electronics, thereby masking true finance charges and APRs, withheld information on bills about balances and payments, and violated various states' laws in collecting the debts. In some instances, service members would receive statements indicating that the APR on their loan was 16% when the APR really was over 100%. The scheme is a reminder of the endless variations that companies peddling alternative financing / high-cost credit may use, and how broad laws against predatory lending need to be in order to be effective.