If ANY company offers u an equity loan on your car, it's a bad choice.

Immoral criminals, plain and simple.

So, after she agreed to the loan, took the loan, spent the money that the loan gave her, and defaulted on the loan, she thinks it's illegal? She didn't think this back when she signed for it? Right on.

Thats f'd up right there.

Read it and think about it before you sign it and agree to it! Sorry to blame the consumer.... but she did agree to the terms when she signed it... Maybe should have thought that one out a little bit.

I will add, though, that the bank should be ashamed of such predatory lending.

We have to wonder that if the banks weren't preying on people they knew couldn't pay.... would our economy still be in the toilet right now?

Interested in seeing how the numbers behind the loan were presented to her prior to signing. I can't really imagine any circumstances where I'd think agreeing to pay an additional $25,000 on my car loan would be worth $5,000 in cash right now.

just two weeks ago as i was looking to refi my car loan, BofA (of course) told me i could do the same thing. I asked them why anyone would ever do that and they said some people do.

Another lending crisis coming in 3....2....1....

Blame them both. Everybody has had a hand in this damn mess...the banks who gave out shitty loans all willy nilly and the consumers who gladly took those shitty loans. Why do Americans seem to have this innate inability to see past what they're going to be eating for dinner that night?

@evslin:

And I stil can't wrap my head around getting equity out of a depreciating asset! Why would anyone do such a thing?

If it's losing value, how do you get equity?

My head hurts...

Wow...ponderous, fucking ponderous

@Tightlines:

I think just as much as banks fail to educate people and give out predatory loans like they're going out of fashion (lol), so too are the consumers not educating themselves. It's too easy to think "I need cash now - to hell with later"

Then later comes and they cry that the big bad bank ruined them...

So I agree that each is at fault. People need to be educated. Perhaps since the bank is the one drafting all the docs, they can educate the consumer too (as if)

We will give you $5000 now but you will then owe an additional $25,000 on your car note....

@chemmy:

>> If it's losing value, how do you get equity?

That's why it was an immoral thing to do. They called it an equity loan when in fact it wasn't.

@chemmy: Well, you get equity by paying it off faster than it depreciates. This is how it's supposed to work with cars, after all -- the last thing you want is to be upside-down, owing more on the car than it's worth.

The bizarre thing isn't that there's equity, but that any bank would think it's a good idea to let someone tap it with a loan. The only sensible way to tap equity in a car is to sell it and buy a cheaper car.

Just wondering how it is that banks, after posting billions in losses in the mortgage mess, are going to turn around and do the same thing with cars? I'll fight, scrimp and save to keep my house, but if I'm in a pinch, I'm pretty ready to hand over the keys. Does anyone at HQ think this is a good business plan? Or are they as ready to have a parking lot full of used cars as they now have foreclosed properties?

Yeah, you have to blame the consumer on this one. An interest rate of 3% that MORE than quintuples to 16%+???

And on a car...no less.

So can they foreclose on her car and take it away? When the car is worth $3000 in 5 years can she just stop paying and let the bank take it off her hands? Sounds like a good deal to me.

@lightaugust:

They apparently are ready to own a mass of used cars. My wife had a leased vehicle, and when the time came to turn it in or buy it, they didn't want to finance it. It wasn't a credit-based decision -- it just wasn't their policy. So they took it back.

I don't know the ins and outs of leasing from the bank's perspective, but it was a surprise that they would have rather taken the vehicle back.

Ok, let's see how the 'stop blaming the consumer' crowd can spin this one.

Why am I supposed to feel sorry for her? She did not read the loan papers and didn't get professional advice before signing the loan. The bank may have taken advantage of her stupidity, but that is not illegal.

People need to use their brain and get a lawyer anytime doing a loan.

I took an equity line for my home from Wells Fargo, but then transferred the balance to no interest credit cards, which I have been paying off.

I've had to sign for a new 0 interest credit card every year or so, but I will be done paying off the balance in Oct.

The lesson here: Read your contracts & ask questions before you sign them!

@Orv: Or to buy a car that is appreciating in value.... But then you'd have a collector's item on your hands and probably wouldn't be financing it thru Wells Fargo anyway ;)

@MyPetFly: What law was broken? Please cite it.

@chemmy: Still I wonder, how can you make a loan like this and sleep tight at night?

As sales reps in electronics, we always warned customers when the product was crappy, then if the customer buys it ''it's 50$ cheaper!'', not my problem any more. You were warned.

Which brings me to the point, that many people are very greedy, and don't think about future consequences, as long as they save some now.

@Edge23:

Okay, I over-reacted. ; ) Although I'm not certain it's not criminal. Are usury laws still around? I'm no legal or financial expert.

Yet another Consumerist article showcasing the inadequacies of consumers AND lambasting the corporations in the same breath.

Yes, Wells Fargo is scummy for doing this. But the customer is a complete idiot for FAILING to pay attention to what she was getting into.

Folks, shitty deals like this WILL NOT EXIST if you just PAY ATTENTION.

@backbroken: I'm not willing to blame her without knowing how the terms were disclosed to her. I seriously doubt she was told how much this would increase the amount of her car loan. My guess is they hid how much it would cost her.

The only good thing about WellsFargo is that they usually have better customer service than other banks. That being said, their savings have the lowest interest rates and loans with one of the highest among the larger financial institutions.

The funny part is, Wells Fargo is going to get stiffed for their greed (at least on this one). Since they already reposessed her car, the remaining balance (what the lawyer called "deficiency balance") is now unsecured credit and puts Wells Fargo way at the back of the line in bankruptcy court.

@Orv: They hid the fact that they were handing her cash? More cash then her car was worth?

Basically this is the same as an interest only loan on a mortgage, only with more risk and less asset.

@Edge23: A lawyer anytime you do a loan? I'd like to think I have enough brains to enter into an auto loan without hiring a lawyer.

This is entirely her fault. Period. This isn't "blame the victim", she's NOT a victim. She willingly signed that loan and agreed to those terms. Now she's mad about it? Whatever happened to personal responsibility? She's retarded and the loss of her car and her good credit was her own damn fault.

@Orv: No matter how many other pieces of paper they hide it in, you do have to sign a sheet of paper that clearly states the total loan payoff amount if you follow the payment schedule. She had to sign a piece of paper that said $48K on the top. If she didn't look at it that's her fault. If the bank actually didn't present it, yes, that's criminal. But I don't really see Wells Fargo leaving something like that out, knowing that the customer could probably have the penalties voided in court as a result.

@sgodun: The article really doesn't blast Wells Fargo, it simply says that Wells Fargo was the bank underwriting the loan.

@evslin: If its anything like a refi mortgage, the cash in hand was just part of the cash out. They usually pay off the other bills as part of the terms of the loan (so you dont go spend the money they are lending you without paying down your other debt). Its easy to see how it makes sense on first blush, since you pay off 20%+ credit cards with a 15% loan, but at some point you wind up being upside down on a dead car.

@evslin, it probably looked something like this:

Your car equity loan will be for the same amount as the original loan! You borrowed $23k for the original note, and that's what we'll write this loan for! (Nevermind that your car isn't worth 23k anymore, or that we've quintupled the interest rate!!!)

My guess is, the amount it would take to finish paying the original loan, including all interest for the full period of the loan, was the $23,600 figure. While the balance plus interest of the new loan comes to nearly $49k.

Her fault for not reading the documents and finding out what the new interest rate was. Or if she was aware of the new rate, understanding how that affected the amount that she would be paying the bank.

But it's still pretty scum-sucking behavior on the part of the lending officer who wrote up that piece of crap.

Wow, that's just messed up. The type of person (financially speaking only) that would need an equity loan on a 2005 VW is not the type of person that could handle a $50K car loan.

Yes the customer signed the contract and should have read the details, but anyone who tells me that Wells Fargo wasnt hoping that she was either a. very desperate or b. wouldnt read the contract, well, if you belive that I've got a lovely 125 year old bridge to sell you.

Shame on you Wells Fargo, we'll see you in next years Worst Company brackets.

@silencedotcom: If you don't need a layer to look over the forms, then good for you. I didn;t either, but I read my loan forms numerous times to make sure I understood the terms and language.

This woman did not. She is at fault.

Large companies have lawyers looking out for their interests. If people want to be safe, then should hire a layer - who is on their side.

does anybody know how loans work in other countries? I'm just curious if Americans are having to cover the gaps due to limits imposed by other governments. Similar to prescriptions. Most countries have limits on what the drug companies can sell their drugs for (Canada included) so the US consumer is forced to pay higher prices. Am I making an sense at all?

Also, if she was in final trouble - why didn't she sell her car and buy a used and cheaper one?

This story shows people make dumb decisions. I've never paid over $10,000 for a car. I've always bought used.

And there a few "Texas Star Car Title Loan" shops cropping up around here. Sounds like the same thing, and probably more predatory than Wells Fargo (if that's possible). Pawn shops and cash advances are bad enough, but this is scary.

I didn't see anywhere that it said she was "completely aware" of the terms of this loan when she signed. I agree that you'd have to be insane to sign a contract with these terms, however a large slice of the population isn't very good with money. (See: housing bubble) Often, people I see who are in trouble financially were honestly unaware of the severity of contracts they signed.

I mean, there's full disclosure in the contract, but that doesn't help someone who doesn't understand it. Loan officer explains, , they feign understanding, they nod, they sign.

People don't want to admit they have no idea what's going on. Banks profit. Math is important kids!

Still, bad form Wells Fargo.

This is exactly why I refinanced my car and got away from Wells Fargo. They are croooooooook-ed.

There are too many uneducated people.. or people just plain intimidated by the aura of the bank to ask questions. On top of that WAY too many people who think the people at the bank are looking out for the customers best interests.

That said the customer here signed a bad deal and has to deal with it (in this case, bankruptcy, so.. eh). Wells Fargo is a sketchy company for coming up with this masterful plan at bilking their customers, and long term will pay for it. If not monetarily, immediately, then hopefully customers will wise up and move to local banks and credit unions.. (as they should anyway)

You wonder how a loan sales rep sleeps at night, but I would suspect that a good many of these sales reps don't understand how the loan works either..

You wonder how the higher ups that come up with this crap sleep at night.

So what happens to her home loan when she defaults on the car loan from the same place?

And it's not clear -- was this a telemarketing sales pitch? If so, the offer should have been rejected outright -- you can't see the numbers and terms in front of you, nor comparison shop.

Predatory Lending...

"Predatory lending is defined as intentionally placing consumers in loan products with significantly worse terms and/or higher costs than loans offered to similarly qualified consumers in the region for the primary purpose of enriching the originator and with little or no regard for the costs to the consumer."

Fuck Wells Fargo. On those terms, how could they expect her to not default? Watch - when a jillion people default on their CELOC's, they will ask for a bailout.

@Landru:

Oh so my overuse of the term wasn't all bad!

@Edge23: The kinds of people who need these kinds of loans are, by definition, the kinds of people who can't afford lawyers. (I suspect the banks know this, too.)