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2018-01-18 / Other News

Know Before You Sign On The Dotted Line

By Jason Linetsky

Carlos Ortiz, director of Community Affairs for the Department of Consumer Affairs. Imagine going to a used car dealership and finding the perfect vehicle for you and your family - with a price tag to match. The dealer presents you with an amazing deal. For the low, low price of $1,000, you can drive off the lot with no payments for the first two months, then 24 months of payments after. Does that sound like a steal? You sign the contract and drive away with a smile on your face, excited to pull into your driveway with your family waiting to see it. Then, that first bill comes and you realize, 24 months later, that you will end up paying thousands of dollars in interest.

Carlos Ortiz, director of Community Affairs for the Department of Consumer Affairs (DCA), spoke at Tuesday night’s Marine Park Civic Association meeting about such “predatory lending” cases and what consumers can do to protect themselves against such practices. Attendance was low for the month’s meeting inside the Carmine Carro Community Center, 3000 Fillmore Avenue, but those who braved the chilly weather learned quite a bit about the dangers of signing contracts without researching the terms first.

“The reason why it’s so important to educate you about these practices is because not all of us are financial experts,” stated Ortiz. “At the end of the month, you have your rent, your phone bills and your other bills. You have things you want to buy for yourself or for your family or friends. At the end, you may have a little bit of money left. You want to make sure it’s used the right way. It’s stressful. It’s even more stressful if you walk into a store and someone says, ‘Look at this great deal! Sign here! Sign here! You have questions? You don’t have to ask questions! Don’t worry about it!’ But, you do have to worry about it. It’s your money and you want to take care of it.”

Ortiz explained many of the tricks businesses use for predatory lending with anecdotes, including a woman who lived in New York City but drove to work in Long Island. Hurricane Sandy destroyed her car. With public transit, it would’ve taken her three hours each way. She quickly found a used car lot and found a replacement. The “quite charming and sweet dealer” brought her to a back room and had her sign a bunch of papers she didn’t read. She walked out with a 23 percent interest rate.

In a similar case, a man went to a store to furnish his new home. However, he only had $500 to spend. After finding the furniture he wanted, he was offered a deal with low payments. He signed the deal without noticing high interest rates over a span of many years.

Ortiz continued, “He ended up paying double, almost triple, the $500 he wanted to spend. These are very similar things we see happening. Sometimes you’re a little quick, a little bit desperate to get something. The woman needed a car to get to work. The guy didn’t want an empty house. However, sometimes you just don’t know what your financial state is. In both of these cases, their credit was never checked.”

There are some signs to look out for to protect yourself against predatory lending. These include:

Discrimination - Are you getting worse credit or a worse deal on your loan because of who you are? Of how old you are? Of the language you speak?

Add-on Agreements - Companies are trying to get more money out of you by adding on more parts to the deal such as insurance, extra electronics and warranties.

Hidden Fees - The charges you get on your monthly bills are not the ones you expected. You get fees for things such as transactions, convenience, negotiating with a specific person, fees for a specific day and many other ones that are suddenly added on to your bill.

Interest Rates - A 16 percent interest rate is a predatory interest rate. That’s the rate where you get stuck in a debt circle with the business. You will pay off the interest but never pay off the principal balance. An interest rate of 24.9 percent or above for a product or loan is illegal in New York, so you can call the DCA to get you out of the deal.

Here are some safety tips:

Research, Research, Research - Shop around for what you want. Look at a variety of stores, similar items and pricing. Go into the stores knowing what you want and how much it’s supposed to be. If you know how much an item is, then a salesperson can’t give you an inflated price.

If it sounds too good to be true, then it is too good to be true - Too many people go for deals despite them sounding impossible, such as “Need money? Fill out an application! No credit check! No paperwork! Come and do it now!”

Safe financial services - One example: New York City free tax service. They prepare your taxes for free and you receive your full refunds. Paid tax preparers are charging to do your taxes but making a large amount of money by offering you refund anticipation loans or refund anticipation checks. They are taking huge fees out of those loans or checks in addition to the fees they charge for tax preparation.

Call 311 - Possibly one of the worst stories of predatory lending involved Major Auto World, a used car dealership advertised on television and well known for having thousands of cars at their location. This case came after hundreds of calls to 311 and the DCA “for everything bad the company could possibly do,” said Ortiz. “They were discriminating against people speaking different languages. They were falsifying credit applications for people. In one case, a guy didn’t have enough income or credit history to get a car so they used his girlfriend’s credit history and income. They were doing all these bad practices on top of selling really bad cars. The cars were breaking down in only a couple of months. We found deals like really high interest rates and questioned why they had financing with specific companies the dealer recommended. Now we have a trial against them for over $36 million.”

If you suspect you were a victim of predatory lending or want to send in a complaint against a company for practices described above, go to the Department of Consumer Affairs website at http://www1.nyc.gov/site/dca/index.page.

The next Marine Park Civic Association meeting will take place on Tuesday, February 20th at 7:30 p.m. at the Carmine Carro Community Center. For more information, go to https://www.facebook.com/mpcivic/.

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