Iria

NORFOLK, Va. — NOTE TO REPO MAN: Might want to look into another line of work.

A new gizmo is upping the odds that even the most hard-knock customer will come up with the car payment. Hooked into the ignition system, the gadget comes in a handful of versions with one common conclusion:

No pay, no start.

It's worked wonders at Norfolk's Patriot Auto Sales, where nearly every car that drives off the lot is outfitted with a PayTeck Smart Box, a system that hands over a five-digit code in exchange for each payment. Come due date, the car won't crank until the customer punches the code into a palm-size keypad wired into the dash.
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Read More / Source: USA Today

BWX

It won't last-- only people with bad credit or no other option would agree to such a contract. Most of those people shouldn't be buying cars on credit anyway.


As in the article- what about the safety concerns? What about a mix up in the payment? What about if you are out of town and plan on being one day late on the payment? I bet there will be more lawsuits- eventually someone will win, and maybe with good reason depending on the circumstance.

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EcPercy

I live in the hampton roads area in Virginia and I can tell you that this auto dealer caters mainly to the military. I can understand why they would want a system like this in place, but I would never buy a car that had anything like this in it.

A lot of military personnel have bad credit. So, this company is able to take advantage of that. I am sure that they have insane interest rates as well. It's not unheard of for military people to get into car purchases with a 300% interest rate.

There are two options I see if a lot of dealers were to implement this. 1. Finance through your credit union/bank. 2. Do business elsewhere.

BWX

That is called lone sharking- it is illegal and the contract wouldn't hold up in court, and the institution trying to get away with 300% interest could face prosecution.

Maybe you meant 30%?

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EcPercy

No. I meant 300%. I used to be in the military so I heard about this thing happening all of the time. The base legal team used to come to our ship and warn us to bring any contract to them before signing it. See, once you sign the dotted line it will stand up in court even with the outrageous interest rates.

Companies that did that to the military don't usually last long. The word gets out and people won't go there, but I feel for those that get screwed over.

Now, I am not saying that Patriot does this, but I am sure that their interest rates are really high. Most "bad credit" car loans can easily get you in the 20%+ range.

BWX

Nope- sorry man, that is wrong. The courts will prosecute the loan shark at their discretion and will reduce the interest rate to something reasonable. Ever watch people's court? Judge Judy? I have seen quite a few cases like that, there are laws on the books in most jurisdictions against loan sharking.

A contract is null and void if it is illegal.

Edit- link

It is called Usury.

http://en.wikipedia.org/wiki/Loansharking

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BWX

Ooo, I found this- interesting...

ALABAMA, the legal rate of interest is 6%; the general usury limit is
8%. The judgment rate is 12%.

ALASKA, the legal rate of interest is 10.5%; the general usury limit
is more than 5% above the Federal Reserve interest rate on the day
the loan was made.

ARIZONA, the legal rate of interest is 10%.

ARKANSAS, the legal rate of interest is 6%; for non-consumers the
usury limit is 5% above the Federal Reserve's interest rate; for
consumers the general usury limit is 17%. Judgments bear interest at
the rate of 10% per annum, or the lawful agreed upon rate, whichever
is greater.

CALIFORNIA, the legal rate of interest is 10% for consumers; the
general usury limit for non-consumers is more than 5% greater than
the Federal Reserve Bank of San Francisco's rate.

COLORADO, the legal rate of interest is 8%; the general usury limit
is 45%. The maximum rates to consumers is 12% per annum.

CONNECTICUT, the legal rate of interest is 8%; the general usury rate
is 12%. In civil suits where interest is allowed, it is allowed at
10%.

DELAWARE, the legal rate of interest is 5% over the Federal Reserve
rate.

DISTRICT OF COLUMBIA, the legal rate of interest is 6%; the general
usury limit is in excess of 24%.

FLORIDA, the legal rate of interest is 12%; the general usury limit
is 18%. On loans above $ 500,000 the maximum rate is 25%.

GEORGIA, the legal rate of interest is 7%; On loans below $ 3,000 the
usury limit is 16%. On loans above $ 3,000, the limit appears to be
5% per month. As to loans below $ 250,000 the interest rate must be
specified in simple interest and in writing.

HAWAII, the legal rate of interest is 10%. The usury limit for
consumer transactions is 12%.

IDAHO, the legal rate of interest is 12%. Judgments bear interest at
the rate of 5% above the U.S. Treasury Securities rate.

ILLINOIS, the legal rate of interest is 5%. The general usury limit
is 9%. The judgment rate is 9%.

INDIANA, the legal rate of interest is 10%. Presently there is no
usury limit; however, legislation is pending to establish limits. The
judgment rate is also 10%.

IOWA, the legal rate of interest is 10%. In general consumer
transactions are governed at a maximum rate of 12%.

KANSAS, the legal rate of interest is 10%; the general usury limit is
15%. Judgments bear interest at 4% above the federal discount rate.
On consumer transactions, the maximum rate of interest for the first
$ 1,000 is 18%, above $ 1,000, 14.45%.

KENTUCKY, the legal rate of interest is 8%; the general usury limit
is more than 4% greater than the Federal Reserve rate or 19%,
whichever is less. On loans above $ 15,000 there is no limit.
Judgments bear interest at the rate of 12% compounded yearly, or at
such rate as is set by the Court.

LOUISIANA, the legal rate of interest is one point over the average
prime rate, not to exceed 14% nor be less than 7%. Usury limit for
individuals is 12%, there is no limit for corporations. (As warned,
you cannot evade the limit by forming a corporation when the loan is
actually to an individual.)

MAINE, the legal rate of interest is 6%. Judgments below $ 30,000
bear 15%, otherwise they bear interest at the 52 week average
discount rate for T-Bills, plus 4%.

MARYLAND, the legal rate of interest is 6%; the general usury limit
is 24%. There are many nuances and exceptions to this law. Judgments
bear interest at the rate of 10%.

MASSACHUSETTS, the legal rate of interest is 6%; the general usury
rate is 20%. Judgments bear interest at either 12% or 18% depending
on whether the court finds that a defense was frivolous.

MICHIGAN, the legal rate of interest is 5%; the general usury limit
is 7%. Judgments bear interest at the rate of 1% above the five year
T-note rate.

MINNESOTA, the legal rate of interest is 6%. The judgment rate is the
"secondary market yield" for one year T-Bills. Usury limit is 8%.

MISSISSIPPI, the legal rate of interest is 9%; the general usury
limit is more than 10%, or more than 5% above the federal reserve
rate. There is no usury limit on commercial loans above $ 5,000. The
judgment rate is 9% or a rate legally agreed upon in the underlying
obligation.

MISSOURI, the legal and judgment rate of interest is 9%.
Corporations do not have a usury defense. (Remember that a
corporation set up for the purpose of loaning money to an individual
will violate the usury laws.)

MONTANA, the legal rate of interest is 10%; the general usury limit
is above 6% greater than New York City banks' prime rate. Judgments
bear interest at the rate of 10% per annum.

NEBRASKA, the legal rate of interest is 6%; the general usury limit
is 16%. Accounts bear interest at the rate of 12%. Judgments bear
interest at the rate of 1% above a bond yield equivalent to T-bill
auction price.

NEVADA, the legal rate of interest is 12%; there is no usury limit.

NEW HAMPSHIRE, the legal rate of interest is 10%; there is no general
usury rate.

NEW JERSEY, the legal rate of interest is 6%; the general usury limit
is 30% for individuals, 50% for corporations. There are a number of
exceptions to this law.

NEW MEXICO, the legal rate of interest is 15%. Judgment rate is fixed
by the Court.

NEW YORK, the legal rate of interest is 9%; the general usury limit
is 16%.

NORTH CAROLINA, the legal interest rate and the general usury limit
is 8%. However, there is a provision for a variable rate, which is
16% or the T-Bill rate for non-competitive T-Bills. Above $ 25,000
there is no express limit. However, the law providing for 8% is still
on the books- be careful and see a lawyer!

NORTH DAKOTA, the legal rate of interest is 6%; the general usury
limit is 5 1/2% above the six-month treasury bill interest rate. The
judgment rate is the contract rate or 12%, whichever is less. A late
payment charge of 1 3/4% per month may be charged to commercial
accounts that are overdue provided that the charge is revealed prior
to the account being opened and that the terms were less than thirty
days, that is, that the account terms were net 30 or less.

OKLAHOMA, the legal rate of interest is 6%. Consumer loans may not
exceed 10% unless the person is licensed to make consumer loans.
Maximum rate on non-consumer loans is 45%. The judgment rate is the
T-Bill rate plus 4%.

OREGON, the legal rate is 9%, the judgment rate is 9% or the contract
rate, if lawful, whichever is higher. The general usury rate for
loans below $ 50,000 is 12% or 5% above the discount rate for
commercial paper.

PENNSYLVANIA, the legal rate of interest is 6%, and this is the
general usury limit for loans below $ 50,000, except for: loans with
a lien on non-residential real estate; loans to corporations; loans
that have no collateral above $ 35,000. Judgments bear interest at
the legal rate. It is criminal usury to charge more than 25%.

PUERTO RICO, the legal rate of interest is 6%; all other rates are
set by the Finance Board of Office of Commissioner of Financial
Institutions. Judgments bear interest at the same rate as the
underlying debt.

RHODE ISLAND, the legal rate of interest and judgment rate is 12%.
The general usury limit is 21% or the interest rate charged for T-
Bills plus 9%.

SOUTH CAROLINA, the legal rate of interest is 8.75%, and judgments
bear interest at the rate of 14%. Subject to federal criminal laws
against loan sharking there is no general usury limit for non-
consumer transactions. The South Carolina Consumer Protection code
provides regulations for maximum rates of interest for consumer
transactions. Please consult with counsel for the latest rates.

SOUTH DAKOTA, the legal rate of interest is 15%, judgments bear
interest at the rate of 12%. There is no other usury limit. There are
certain limitations on consumer loans below $ 5,000.00.

TENNESSEE, the legal rate and judgment rate of interest is 10%. The
general usury limit is 24%, or four points above the average prime
loan rate, WHICHEVER IS LESS.

TEXAS, the legal rate of interest is 6%. Interest does not begin
until 30 days after an account was due. The judgment rate of interest
is 18% or the rate in the contract, whichever is less. There are a
number of specific ceilings for different types of loans, please see
counsel for information.

UTAH, the legal rate of interest is 10%. Judgments bear interest at
the rate of 12%, or a lawfully agreed upon rate. There are floating
rates prescribed for consumer transactions. Please see counsel for
information.

VERMONT, the legal rate of interest and judgment rate of interest is
12%. On retail installment contracts the maximum rate is 18% on the
first $ 500, 15% above $ 500. The general usury limit is 12%.

VIRGINIA, the legal rate of interest is 8%. Judgments bear interest
at the rate of 8%, or the lawful contract rate. Corporations and
business loans do not have a usury limit, and loans over $ 5,000 for
"business" or "investment" purposes are also exempt from usury laws.
Consumer loans are regulated and have multiple rates.

WASHINGTON, the legal rate is 12%. The general usury limit is 12%, or
four points above the average T-Bill rate for the past 26 weeks,
whichever is greater. (The maximum rate is announced by the State
Treasurer.) Judgments bear interest at the rate of 12% or the lawful
contract rate, whichever is higher.

WEST VIRGINIA, the legal rate of interest is 6%. The maximum
"contractual" rate is 8%; Commissioner of Banking issues rates for
real estate loans, and, may establish maximum general usury limit
based on market rates.

WISCONSIN, the legal rate of interest is 5%. There are a myriad of
rates for different type of loans. There is no general usury limit
for corporations. Note that a loan to an individual, even if a
corporation is formed, will violate the law. The judgment rate of
interest is 12%, except for mortgage foreclosures, where the rate
will be the lawful contract rate.

WYOMING, the legal rate and judgment rate of interest is 10%. If a
contract provides for a lesser rate, the judgment rate is the lesser
of 10% and the contract rate.

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EcPercy

Well it appears that you are right. I do know that it was happening in 1997 when I was stationed at great lakes, IL. It was happening at an alarming rate. Other things were happening at that time too. For instance. Great Lakes Federal Credit Union was scimming the change off your paycheck. Something like they did in the movie office space.

Anyway, obviously the laws have changed. I am curious what those interest rates are for though. It looks like those may apply to mortgages otherwise credit cards would not be issued at 24%.

BWX

I just found some of that out myself too, but yeah I knew there were laws for that..

But hey, that doesn't mean that stuff didn't happen.. we all know crap happens all the time that isn't legal. but if they went to court the people charging crazy interest would get in trouble. The thing is most people involved in that sort of thing want nothing to do with any court, so the law cannot protect them.

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