Car repossession is an unsettling moment, whether you discover the vehicle missing or you see the tow truck take it away. For Yvette Harris, that “moment” has lasted more than ten years. She continues to pay for a 1997 Mitsubishi, a now twenty-year-old, “vintage” car she no longer owns.
Like many Americans with less than stellar credit, the single mother turned to a subprime auto lender with high interest rates and fees. What was not on the fine print of the loan documents she and others have signed is the continuing “relationship” that goes on after a car is repossessed.
After reselling the car, Harris’ subprime auto lender was unable to recover the entire balance. Determined to collect what remained, they filed suit in court and won the right to seize a portion of her income to cover the debt. To date, the lender has garnished more than $4,000 from her paychecks, forcing Harris to go on public assistance to support her two sons.
Doing the math, Yvette Harris has been paying for a repossessed car for 13 years.
Her tale is all too common for those needing a vehicle to get to and from work and run necessary errands. For many, buying and leasing is not an option. Desperately in need of transportation, people are willing to roll the dice and take on thousands of dollars in debt with interests rates up to 24 percent.
The alliance of subprime lenders and auto lenders has generated billions of dollars in high-interest loans. Lenders claim that they are taking a chance as well. However, their “risks” have “rewards” when they repossess a car and engage in aggressive collection tactics, up to and including wage garnishment.
Lenders argue that subprime auto-lending meets an important needs and they are only recouping what they are legally owed. Collecting debt has become a critical part of their business, if not their highest priority.
Credit Acceptance, a well-known auto lender in the subprime market, does not bother to list the loans it makes first on its quarterly earnings statements.
At the top? The revenues they expect on the debts they collect.