Wednesday, March 1, 2017

Rent-to-Own Your Pet! (For a Steep Price!)


Just when you think you've seen everything property transactions have to offer . . . a company in Nevada called Wags Lending is offering credit products to help you rent-to-own your pet! Unforuntately, it appears that a number of the people engaging in these transactions are doing so completely in the dark - often believing they are purchasing Fluffy outright while they are in fact entering into a complicated lease-to-own contract. Check out this article in Bloomberg that explores the issue:

The Sabins had bought their new dog, Tucker, with financing offered at the pet store through a company called Wags Lending, which assigned the contract to an Oceanside, California-based firm that collects on consumer debt. But when Dawn tracked down a customer service rep at that firm, Monterey Financial Services Inc., she learned she didn’t own the dog after all.

“I asked them: ‘How in the heck can I owe $5,800 when I bought the dog for $2,400?’ They told me, ‘You’re not financing the dog, you’re leasing.’ ‘You mean to tell me I’m renting a dog?’ And they were like, ‘Yeah.’ ”

Without quite realizing it, the Sabins had agreed to make 34 monthly lease payments of $165.06, after which they had the right to buy the dog for about two months’ rent. Miss a payment, and the lender could take back the dog. If Tucker ran away or chased the proverbial fire truck all the way to doggy heaven, the Sabins would be on the hook for an early repayment charge. If they saw the lease through to the end, they would have paid the equivalent of more than 70 percent in annualized interest—nearly twice what most credit card lenders charge.

* * * 

“There is just no way I should pay over $5000 for a $2000 puppy,” wrote one customer in an April 2014 complaint collected by the Federal Trade Commission after financing a Yorkshire terrier from a Kennesaw, Georgia, pet store with a lease from Wags Lending. (That complaint and the others that follow were directed at Monterey Financial by customers who had financed high-end pets through Wags Lending.) “The rep … told me the payments I had been making are rental [fees],” wrote another surprised lessee. “For a dog?? They are renting animals?? No way! Yes it's true!”

One cat lover described buying a Bengal kitten from a breeder in Jacksonville, Florida, at a sticker price of $1,700—then learning they were on the hook for 32 monthly payments of $129, or about $4,100. “They explained to me that not only was this not a loan but a lease in which I would either have to continue making these payments or return the animal,” the customer wrote in a November 2015 complaint. “Also this cat is ruining my credit score.”

The complaints raise a valid question: Why would anyone walk into a pet store to buy an animal and decide, instead, to lease?

Check out the full story here. There's been a lot written about the abuses surrounding installment land contracts (check out these articles in the NYT here and here). Also, the Uniform Law Commission is currently working on an installment land contract project and the CFPB has taken an interest in these types of predatory transactions as well. These pet financing contracts, although involving personal/movable property, raise similar consumer protection concerns.  In any event, many of the contracts described in the article above lack many of the basic characteristics of a lease, as pointed out by Margot Saunders with the National Consumer Law Center. I think one of the most egregious parts of the article comes in the way of a quote from the CEO of the parent company of Wags Lending: "Wunderlich . . . hastens to argue that while he profits off high-cost lending, he’s also improving the lives of subprime borrowers." Another gem: 'We like niches where we’re dealing with emotional borrowers,' Wunderlich said."

There are all kinds of legal issues here to deal with. If this is a lease then what sort of legal duties does the lessor owe to the lessee? This looks more like just a loan disguised as a lease with some form of security attached - but with a huge interest rate included and some hidden fees and charges. What warranties does the lessor owe to the lessee as to the condition of the pet? If it's just a lease then obviously the lessor continues to own the pet throughout the duration of the term. Then, of course, there are a ton of issues with disclosure (as evidenced by some of the people interviewed in the story). The focus on subprime borrowers is particularly troubling . . .

Yet another reason to make sure you read the fine print before you sign on the dotted line . . .

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