Sleazy ads promise easy loans

In addition to those annoying Buick and Lexus pitches, the pizza deals, and the movie promos, my annual football bowl watching binge exposed me to what seemed like dozens of ads for suspicious outfits offering quick and easy loans. While the former category of commercials were clearly national, I suspect the latter category were fill-ins sold by the local station in California.

A company called LoanMe (I'm not going to link but they are easy to find) showed a borrower waiting for a bank to approve a car loan and a real estate agent anticipating a sale -- they brimmed with delight when they learned they could get cash right away from this lender. The pitch didn't pass the smell test. What's the interest rate? What are the fees? What's the business model that makes offering unsecured personal loans profitable?

A review site for borrowers explains how LoanMe does it:

LoanMe.com offers personal loans ranging from $2,600 to $25,000 and interest rates from 35.87% APR to 204.94% APR. All loans have a $75 loan fee. The lower APR is only available for loans of $25,000. A $2,600 loan has a rate of 204.94% to be repaid in 47 months. The monthly payments would be $431.49, which means you would end up paying $20,280 for a $2,600 loan!

Although LoanMe.com's website doesn't specifically say that $2,600 is the smallest loan available, it's the lowest amount for which they offer an interest rate. There is a reason for this. ...loans for $2,500 or less are limited by law to a maximum interest rate of 30%. Loans for more than $2,500 have no APR limitation. This means that even if you repay a big chunk of the loan on the same day, they will still be able to charge you an interest rate of 204.94% on a loan that would otherwise be limited to a 30% APR.

Apparently LoanMe is a new name for a lender named CashCall which the California Department of Business Oversight is trying to put out of business. Their web sites have the same Orange County address. And in December, Senator Elizabeth Warren's contribution to the federal regulatory bureaucracy, the Consumer Financial Protection Bureau (CFPB)

took its first action against an online loan servicer, CashCall Inc., its owner, its subsidiary, and its affiliate, for collecting money consumers did not owe. The CFPB alleges that the defendants engaged in unfair, deceptive, and abusive practices, including illegally debiting consumer checking accounts for loans that were void.

“Today we are taking action against CashCall for collecting money it had no right to take from consumers,” said CFPB Director Richard Cordray.

It didn't take particular genius to guess that LoanMe was somehow trying to prey on needy people by making implausible claims. But as Erudite Partner, the former accountant, wondered while we watched the tube: "can it be legal?" Apparently there are limits to what the fraudsters can get away with. That strikes me as good work by several levels of government. And hard work, since the swindlers seem to recur under new names.

I would never question the right of TV stations to sell ad space to anyone, but does ESPN, which presents almost all football bowls, really want to be associated with crooks?