Other Debt Dealing with Tribal and Installment Loans

K

Kellerwerks

New Member
Jurisdiction
Texas
Well, this is a situation. I'm looking for answers and getting a lot of shoulder shrugging.

Been a little over a decade since I tangled with payday loans, I finally killed that monster, but now I'm sorry to find myself back in a way. Same situation, different dressing. I swore I would never get trapped by payday loans again and, technically, I haven't. These are "installment" loans, but it looks like they're all run by PDL companies. I have been able to pay quite a few off or consolidate some, but now I got four big ones that are giving me a headache. One of them is store front, so I guess it's the most 'legit' of all.

I won't deny that I've played with the PDLs and installments from time to time since I first got stung, but I was always careful to take out not exorbitant amounts and pay them off quickly. It just takes one false move for the avalanche to start…

I had contacted InCharge Debt Solutions with the info. I called them once to confirm that they dealt with "installment" loans, and even name checked two. But when I spoke to someone the next day, I found that only my credit cards were showing up in their system. When I named the companies and gave them the info, they told me that these were Payday Loan companies and that's why they weren't showing up in their system.

I know that there are a number of PDL Consolidation companies out there who I would assume work with these "Installment" loans, but I think I find a lot of them only slightly more shady than the PDL Companies themselves, so I don't know who to trust.

So the info:

I'm in Texas.

The loans:

1. Check N Go. Storefront. Loan was for $5000. Current balance is $6076.75. Payments are $725. Paid nothing yet.

2. Maxlend. Online. Loan was for $2500. Current balance is $2229.25. Payments are $422. Paid $3376.

3. Makwa Finance. Online. Loan was for $600. Current (payoff) balance is $817.02. Payments are $145.85. Paid back $729.25

4. Sunshine loans. Online. Loan was for $1000. Current balance is $1953.54. Payments are $280.40. Paid back $280.40.

Maxlend and Makwa are tribal loans. Now, what I heard on another forum was that since tribal loans operate outside of state and local laws and mandates, all I REALLY owed such companies was the principal amount that I originally borrowed. After I paid that amount off, I did not have to pay any of the exuberant interest. I asked to make sure this was true on AVVO, another legal board, and was responded to with "I think that is not correct. As with any lender they can collect what you agreed to pay unless the interest is above what state law allows." I am pretty sure that the interest IS above what state law allows, so… I'm covered? Not covered?

Finding straight answers and info is hard. I called the Texas Consumer Commission, and was told that they didn't know as they didn't govern tribal law. They suggested I contact a consumer attorney, but everyone I've contacted has said that they had no idea and wouldn't even know where to find that information.

So that's the situation I'm in. Nobody knows anything, but I'm pretty sure those lenders are going to try to snag what they believe they're owed. How, or how successful they'll be…?

As of right now, I've closed my old checking account, so they can't make ACH debits from it anymore. I guess I will be spending the weekend trying to make sense of this all. It is certainly a distracting thing to contend with in one's mind during work hours.

So, obviously, if anybody has anything even slightly resembling a knowing answer, I'm keen to hear it. Any advice whatsoever would be greatly appreciated.
 
One thing I can tell you with absolute certainty is that all of your loans suffer from negative amortization. That's why the balances are higher than the original loan amounts. You're paying interest on interest and never enough to cover any of the interest accrual. You can confirm this with the following amortization calculator.

Mortgage/Loan Calculator with Amortization Schedule (bretwhissel.net)

Assuming a 20% interest rate on all 4 loans (and I am probably underestimating):

$5000 should have been paid off in 7 months at $725 per month. If you start paying $725 per month on the $6077 balance it will take you 9 months to pay off.

$2500 should have been paid off in 9 months at $422 per month. If you start paying $422 per month on the $2229 balance it will take you 8 months to pay off.

$600 should have been paid off in 12 months at $146 per month. If you start paying $146 per month on the $817 balance it will take you 6 months to pay off.

$1000 should have been paid off in 4 months at $280 per month. If you start paying $280 per month on the $1954 balance it will take you 7 months to pay off.

Plug in the actual interest rates on each loan and you'll see where you stand.

Kellerwerks said:
Maxlend and Makwa are tribal loans. Now, what I heard on another forum was that since tribal loans operate outside of state and local laws and mandates, all I REALLY owed such companies was the principal amount that I originally borrowed.
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That's wrong. A contract is a contract. You agreed to pay, you pay what the contract says. The tribal lender can sue you in small claims court just like any other lender.

Kellerwerks said:
As with any lender they can collect what you agreed to pay unless the interest is above what state law allows." I am pretty sure that the interest IS above what state law allows,
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You're probably wrong there. Credit card rates are as high as 29% and that's legal in every state.

Kellerwerks said:
Same situation, different dressing. I swore I would never get trapped by payday loans again and, technically, I haven't. These are "installment" loans, but it looks like they're all run by PDL companies.
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Doesn't matter what you call it. It's an installment loan. And they are all "legit." You borrowed the money at an agreed legal rate of interest and signed a contract. That's all it takes to be "legit" even if you borrowed it from your bookie.

Kellerwerks said:
I'm pretty sure those lenders are going to try to snag what they believe they're owed. How, or how successful they'll be…?
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If you have breached the contract they can sue you in small claims court and easily get a judgment. How successful they would be in collecting is another story. Fortunately for you, Texas prohibits wage garnishment for consumer debt (and you've closed your checking account) so the worst that can happen is the judgments stay public record for 10 to 20 years where any future lender can see them.

By the way, the reason these loans don't show up on your credit report is that it costs money to join a credit bureau to be able to report loan payments. These kinds of lenders don't want to spend the money or the time.

One more thing. Avoid loan consolidation companies like the plague. They will take your money, charge you fees, and you won't be better off than you are now.

The only way to get out of debt is to pay off the debts.
 
First of all, thanks for the thorough reply. That was more information than I have been able to get out of anyone, including state officials, government agencies and other attorneys.

So, I guess the question is 'what now?'

It will be next week before anyone notices they didn't get their payments, and I start getting pinged about it. That gives me the weekend to come up with a plan. My first inclination is that I could probably sell enough stuff or raise money in various ways that I could pay at least two of these off outright, making payments on the other two more manageable. I could probably take a good chunk out of those two while I'm at it.

So, I imagine I will be scouring everything in my possession with a fine tooth comb, assessing it's value, and hitting up eBay. Actually, what I could probably get the most money for is selling back my unused vacation days to my job, of which I have over 20.

I know that this is a legal forum and not a financial one, but I'm always open to suggestions from anyone about any aspect of this situation, legal-wise I guess that would encompass what I should tell these people. I know that debtor's prisons aren't a thing anymore and, as stated, they can't garnish my wages, so I don't have to worry about going to jail or getting pegged financially more than I already am. It's just a headache of a situation and I have to find a way to alleviate the pain as much as possible…
 
 
Kellerwerks said:
Annual Percentage Rates:

Makwa: 650%
Check and Go: 137.06%
Sunshine: don't know
Maxlend: 417%
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Jeez. I don't think that calculator goes that high.

Before you pay any more money to those places I suggest call the Office of Consumer Credit Commissioner for help.

800-538-1579

Consumers | Texas Office of Consumer Credit Commissioner

If those rates turn out to be legal you may be better off using your credit cards to pay off those loans, or get a loan to pay them all off, unless you can come up with cash to pay off the balances.
 
adjusterjack said:
Jeez. I don't think that calculator goes that high.

Before you pay any more money to those places I suggest call the Office of Consumer Credit Commissioner for help.

800-538-1579

Consumers | Texas Office of Consumer Credit Commissioner

If those rates turn out to be legal you may be better off using your credit cards to pay off those loans, or get a loan to pay them all off, unless you can come up with cash to pay off the balances.
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The "tribal" loans may not be covered by the state's Office of Consumer Credit
 
Makwa and Maxlend are tribal lenders. Makwa, per its website, complies with federal consumer finance laws. Maxlend is silent on the issue. The other two are US based and subject to Texas consumer finance laws.
 
Zigner said:
The "tribal" loans may not be covered by the state's Office of Consumer Credit
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That would kind of bring me back to one of the questions in my OP. If tribal loans are not covered by the state's office of consumer credit, am I still contactually bound to pay more than the principal on them? Apart from this thread, pretty much everyone I have thus reached out to with this question has given me a solid "dunno"...
 
Kellerwerks said:
That would kind of bring me back to one of the questions in my OP. If tribal loans are not covered by the state's office of consumer credit, am I still contactually bound to pay more than the principal on them? Apart from this thread, pretty much everyone I have thus reached out to with this question has given me a solid "dunno"...
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The fact that they are "tribal" loans does not affect your contractual obligations. There may be other factors (as mentioned above) that come in to play, but you aren't going to get out of paying simply because they are tribal loans.
 
Zigner said:
The fact that they are "tribal" loans does not affect your contractual obligations. There may be other factors (as mentioned above) that come in to play, but you aren't going to get out of paying simply because they are tribal loans.
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This is so confusing.
If the interest charged is greater than what the state of Texas allows, do I need to pay that interest, yes or no?

I did call the TX Consumer Credit office listed above earlier this week, and they stated that they did not know since tribal loans were not under their jurisdiction. Maybe I didn't ask the right question.
 
Kellerwerks said:
If the interest charged is greater than what the state of Texas allows, do I need to pay that interest, yes or no?
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What is the maximum interest rate I can be charged under Texas law?

People frequently ask us what the maximum interest rate in the state of Texas is. Unfortunately, this is not a question with a straightforward answer. Below are a few of the common scenarios that patrons ask about.

Generally
There a few sections of law that set forth maximum interest rates. Article 16, Section 11 of the Texas Constitution states that in the absence of other legislation, contracts involving a rate of interest higher than 10% "shall be deemed usurious". This section also states that "in contracts where no rate of interest is agreed upon, the rate shall not exceed" 6%.

Several chapters of the Texas Finance Code address interest rates:

Chapter 302 FINANCE CODE CHAPTER 302. INTEREST RATES discusses interest rates in general and reiterates the rates specified in the Texas Constitution.

Chapter 303 FINANCE CODE CHAPTER 303. OPTIONAL RATE CEILINGS discusses optional rate ceilings and caps it at 18% in section 303.009.

Chapter 342 FINANCE CODE CHAPTER 342. CONSUMER LOANS discusses consumer loans and interest charges beginning in subchapter E.

Chapter 345 FINANCE CODE CHAPTER 345. RETAIL INSTALLMENT SALES discusses retail installment sales and permissible time price differentials.

Chapter 346 FINANCE CODE CHAPTER 346. REVOLVING CREDIT ACCOUNTS discusses revolving credit accounts such as credit cards.

Section 346.101 places a maximum interest rate of 18%. Please note that certain interstate banks may "export" the highest interest rate allowable in their home state.

Payday and Title Loans
The Texas Fair Lending Alliance http://www.texasfairlending.org/ has this explanation on their frequently asked questions page http://www.texasfairlending.org/resources/faqs/ :

Question: How are Annual Percentage Rates (APRs) of 500% or more legal?

Usury protections in the Texas Constitution prohibit lenders from charging more than 10% interest unless the Texas Legislature specifically authorizes a higher rate. Payday and auto title businesses have found a way around the constitutional protections by exploiting a legal loophole. Payday and auto title storefronts register as Credit Access Businesses (CABs) under the Credit Services Organization (CSO) Act, broker loans between the borrower and a third party lender, and charge borrowers high fees for arranging and guaranteeing these loans. The third party lender charges interest at or below 10% to avoid licensing under Texas law. CAB fees are completely unregulated and result in APRs over 500%.

For more information on payday loans, please visit our research guide on payday loans. Guides: Payday Loans: General Information


Frequently Asked Legal Questions
 
army judge said:
Question: How are Annual Percentage Rates (APRs) of 500% or more legal?

Usury protections in the Texas Constitution prohibit lenders from charging more than 10% interest unless the Texas Legislature specifically authorizes a higher rate. Payday and auto title businesses have found a way around the constitutional protections by exploiting a legal loophole. Payday and auto title storefronts register as Credit Access Businesses (CABs) under the Credit Services Organization (CSO) Act, broker loans between the borrower and a third party lender, and charge borrowers high fees for arranging and guaranteeing these loans. The third party lender charges interest at or below 10% to avoid licensing under Texas law. CAB fees are completely unregulated and result in APRs over 500%.
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Well, there's the answer, then. Sounds like a "yes."

Honestly, sounds like the best thing to do is to just pay these four off and be done with with them. Never even look at them again. If I pay some of them off early, the cost might be a little less.

There might be some bumps with some of these companies getting their money, but they'll just have to live with it. It is what it is and I can't pay what I don't have, and there's not a whole lot they can really do to me, as we've already gone over.

So, as originally planned, I'll be spending the weekend scouring over all my stuff, physical and financial, and seeing just how much I can get...
 
adjusterjack said:
Exactly.

I think you lost sight of the fact that APR's are not interest rates but are the total cost of the money you borrow (interest and fees).
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Kellerwerks said:
That would kind of bring me back to one of the questions in my OP. If tribal loans are not covered by the state's office of consumer credit, am I still contactually bound to pay more than the principal on them? Apart from this thread, pretty much everyone I have thus reached out to with this question has given me a solid "dunno"...
Click to expand...
Tribal loans are not governed by the State of Texas consumer affairs laws, but that does not have anything to do with your legal obligation to pay. You may also be sued in Tribal court, and good luck there.
 

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