Exposing The Shady Company Preying On Low Income Families
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Despite my curmudgeonly demeanor, the one thing that always makes me happy is helping people with their money problems. One of my goals is to help you avoid money traps so you can have more margin and more freedom. It really is my passion, and it's basically what this whole YouTube channel is about. That and making dad jokes and referencing irrelevant movie clips. That's my favorite part. So you can imagine how ticked off I was when I saw an article about a lending company that was systematically screwing over people who were already struggling with money, driving them deeper into debt, and even taking their cars away.

And in today's video, I'm calling out the company that's been taking advantage of hardworking Americans and their families, and we'll talk about what you can do to make sure you're not one of their victims. So before I get banned, hit those like and subscribe buttons and share this video with your friends who financed a car. They might want to see this. I need...

Help! Okay, first of all, when I heard about what this company was doing, it made me furious. They've hurt lots of families financially, and I wanted to make this video to warn you to stay away from them and to expose the gross behavior. In just a bit, we'll hear from a journalist who broke this story. But first, let's talk about predatory lending. Predatory lenders are companies or people with lending practices that are unfair or even abusive to borrowers.

They usually target people with low income, the elderly, and minority homeowners with the goal of making money by trapping them in debt. Basically, the real life villains minus the sharks with laser beams. And they have all kinds of ways they screw people over. For example, they can make loans based on a person's assets, aka what they own, instead of their ability to repay. Like with a car title loan. If a borrower uses their PT Cruiser as collateral and they can't pay back the loan, the lender can snatch that lady killer right out of their driveway and sell it. And these lenders are easy to spot.

because their buildings often look suspiciously like old pizza huts. Another thing crooked lenders can do is repeatedly refinance a loan and charge high fees each time. And in some cases, they just hide some of the loan details and push people into really bad financial situations without them even realizing it. But the predatory lending I'm talking about today has to do with auto loans, more specifically, loan deferments or extensions.

This is when a lender offers a temporary pause on loan payments, which sounds generous, right? But in some cases, what they're really doing is misleading people into owing them more money. And the company that's made this a big part of their business model is called Exeter Finance. They're one of the largest auto lenders in the country, and they specialize in high-interest loans for people who have a history of not paying bills or defaulting on their debt. So to help us understand what's going on, I talked to Bayard Duncan with the nonprofit investigative newsroom ProPublica.

He and his colleague Ryan Gabrielson wrote a piece about Exeter and how they're hurting hardworking American families. But before we get to the conversation, let me tell you how to keep your personal info away from shady spammers and scammers. And that's by using Delete.me, one of the sponsors of today's video. Delete.me finds and removes your info from hundreds of these data broker sites that sell it for a profit. And Delete.me will send you a report with all the details and how much time they've saved you. And so far, I have saved 55 hours, which is more time I can spend calling out dishonest companies.

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Well, it's my lucky day. I have both of the guys who broke this story. Bayard, Ryan, thank you so much for doing this. Thanks for having us. Nice to be here. So what is happening here with Exeter Finance? Who are they and what are they doing to people? Well, Exeter Finance is one of the largest subprime auto lenders in the United States. They currently have about $10 billion in outstanding loans to a half million people. They partner with dealerships all over the country to fund transactions for people with

lower credit scores and they charge really, really high interest rates on average about 21%. But we've seen cases where 28, 29% for people who they argue cannot get loans any other way. They characterize themselves as a second chance lender, a way of helping people finance car purchases that wouldn't otherwise have a way to have a car.

What our investigation found is that the basic terms of the loan are often so expensive and so difficult that people have difficulty making their monthly payments from the very beginning. And when people get in trouble and they're unable to make payments, Exeter grants loan extensions that at least ostensibly just take the next payment or multiple payments and moves it to the end of the loan.

So it feels like it's this reprieve. Oh, I just get a break. I'll make the same payments and I'll just do it at the end of the loan. The effect of that is it adds a huge amount in interest charges that are the dollar amount is never disclosed. It's never sort of quantified for people. The disclosures are at best vague and hard for most people to understand what is what's going to happen.

And until you get to the end of the loan, if you've been continued making your payments and then you think you just have a few more, you know, to make.

And what ultimately you find is there's thousands, sometimes more than $10,000 in charges that you had no idea. Which for someone who's already broke, struggling to make payments is astronomical. And so they can't make that balloon payment, which then puts them in another pinch. Yeah, that's kind of the paradox of the story is, you know, the same set of criteria that often leads somebody to need extensions in the first place.

are the very criteria that would most likely prevent them from just having $5,000, $7,000, $10,000 lying around at the end of the loan. We spoke to three dozen of these people now who told us unequivocally that Exeter did not clearly explain the financial consequences of getting these extensions, whether they got two, whether they got eight, or even as high as 12 in some cases over the course of a 72-month loan. Wow.

And we, you know, many people haven't heard of Exeter, but they have heard of CarMax. So what is sort of CarMax's involvement with this whole story? So CarMax is the biggest seller of used cars in the United States. So they're a dealership chain, but they are also a lender. CarMax will make the loan itself, but there's a whole bunch of CarMax customers.

who are in the middle or lower credit tiers. And for those, it partners with other outside lenders. And Exeter is one of the big ones. It puts CarMax buyers basically directly in line to get Exeter loans. So

So there's a lot of bad guys in the debt space and the lending space, especially when it comes to subprime borrowers. What makes Exeter different from the next subprime lender down the street? It's a major national auto lender that has grown rapidly the past 10 years. The industry as a whole, all of auto lending has been exploding. You know, there's $1.4 trillion in outstanding debt owed by Americans. And with car prices going up, that amount

It keeps getting higher and higher. So it's not just a guy down the street. It's everywhere. It's nationwide. So it sounds like they're the biggest fish in a pretty scummy pond, pun intended. They're one of, yeah. And they're fast on their way to compete for the top spot, arguably. Wow. That's pretty cool.

As far as to your point about outliers, there are certain things that do make Exeter outliers even compared to its subprime peers. We analyzed a lot of data to try to determine where they landed and we found that in general their loans are more expensive than other companies with a similar clientele of sort of higher risk borrowers.

And a majority of Exeter's loans, more than 200,000, are at least three payments behind schedule, which is roughly twice that of any other subprime lender in the something like 10 million records that Ryan crunched.

So in the article, you guys share real stories of people, of families who felt deceived, hurt financially by Exeter. Bayard, do you have a story that sticks out in your mind of one of these people, one of these families and what they've gone through? Sure. Yeah. I mean, I'll tell you the story of Don Weber. He's a disabled veteran living in Baton Rouge, Louisiana. Purchased his car back in 2016, I believe.

with a high interest rate, something over 25%. Over the course of his 72-month loan, he was granted 12 payment extensions. In some cases, he was just short on cash. He lives off of his disability payments. In other cases, he encountered an unexpected accident

expense, you know, busted brake pads. So each time he got an extension, he says Exeter assured him over the phone that he was current and that he was basically good to go. He, like many of the other folks we spoke to, said that they did not explain the financial consequences of what he was getting himself into. Fast forward to the maturity date of the loan. He has paid every cent that was on the initial disclosures that he was given on his contract.

the Truth in Lending Act disclosures. But what extensions allow a company like Exeter to do is render those disclosures essentially moot because you still owe more money that, again, experts and these consumers told us were not clearly disclosed. Don has paid all that money and he finds himself still owing something around $10,000. He's unable to pull that together. The car gets repossessed and he

finds himself without a vehicle, even though he's paid the whole sum that the contract initially stated, and he spent seven years paying off the vehicle. That is awful. I want to read this quote from the article from Aaron, who is a consumer protection director at Consumer Federation of America. If you can manipulate the payment schedule in such a way that makes the original disclosures meaningless, that's a huge problem.

So, Bayard, that's what you're referring to, where they make the payments, they follow the schedule, even what was in the contract, they make the payments, they pay more than what was owed, and then they still get the car taken away. Is that the piece of injustice here that really grinds your gears? So, I mean, and to be fair to Exeter, Exeter has maintained that their extension practices are in line with state and federal laws. You know, they have...

defended their practices and we gave voice to their defense of those practices. But the fact is when you get these extensions and if you as a consumer, um,

feel as though the the cost was not clearly explained to you yes it is true you're paying more than your contract said you would pay the truth and lending act which is supposed to account for this even if in many cases if you do a loan modification which some experts have argued to us these extensions are are essentially loan modifications you would have to get updated disclosures to see the total you would pay that's not the case with extensions

And so in a certain sense, Aaron Witte, the expert you're quoting is right. If you can find a way as a lender to get more money, to generate another source of an additional source of revenue without updating the cost that was on the initial price tag, that can be something that that can certainly grind the gears of consumers and also also earn extra money on a loan. A lot of these loans,

are structurally unaffordable for the people who take them. But an extension or multiple extensions can keep that loan from defaulting sometimes for the entire length of the loan. So instead of having thousands of loans defaulting in a very short period of time, you have some loans defaulting, but a lot of loans taking extensions and then sort of limping along with people continuing trying to stay up with it, trying to stay current.

Trying to get the loan paid off unaware that within the timeframe of a loan, they'll never be able to do it. Well, I use the calculator on the ProPublica article. You guys actually created a tool that helps people see how much more they're going to owe depending on how many extensions they take and what the interest is. And that was pretty eye opening to see the thousands start to add up as you extend the loan, extend, you know, raise the interest and add on extensions.

So what can people do about this if they're sitting in a situation even similar to this? Just like you said, ProPublica.org slash calculator. If you want, if you're mulling taking an extension or if you have already taken several extensions and you feel like the dollar amount was not

clearly disclosed to you, go to that website. We built this calculator that allows you to just use basic information from your loan contract to determine what the final cost of your extensions will be. This idea sprung from

basically a gap in the law. The fact that the federal government does not require the full dollar amount to be disclosed to consumers, even though I think you could fairly argue that that's the most important piece of information for consumers to make an informed decision in this situation. That's a gap we identified pretty early on in the reporting and built some infrastructure to help fill on behalf of consumers that have encountered or are thinking about taking these extensions.

So there's a lot of people hurting out there and Exeter is saying, hey, we're actually the saviors here. We're helping these people out when no one else would lend them money. We're coming in and swooping in to save the day. And yet the people are saying they didn't disclose all this information. They're sort of rigging this against us to make it even more difficult, taking away our car, adding on extra fees. What?

What is the solution here? We can argue about who's in the right, who's in the wrong. Obviously, we're in favor of the people and the consumer. But what is the solution here that would make you guys smile knowing you did a good job with this piece? People who are engaging in a transaction should know what the terms of the transaction. If you're buying something, you should know what it costs. An extension costs money. It costs increased interest charges.

And those should be spelled out before somebody has to agree to the extension. And by the way, the CFPB's representative who speaks on behalf of their efforts on the auto industry has said something, if not identical to what Ryan just said, quite similar. He has acknowledged on the record with us that all

the information ought to be shared, that there needs to be mutual recognition and mutual understanding on both sides about what the ramifications of a transaction will be. Now, he wouldn't say Exeter or another company needs to start doing A, B, and C because, you know, for a federal regulator to say that, that'll be the product of a long investigation and perhaps even a settlement agreement. But one thing that was clear when we spoke to him was that

transparency is critical, especially for dollar amounts this size, for this particular clientele of vulnerable customer. Our reporting shows, you know, in a variety of different ways that that transparency was not there on the customer side. Well, either way, I would not wish one of these loans on my worst enemy. And I appreciate you guys doing the hard work of digging into the most minute details to show people the truth and to, you know, give a voice to the stories of people out there who are hurting.

And so I have nothing but respect for what you guys do. Ryan Byard, thank you so much for being on today's episode. And I hope I've been a part of spreading the word about this really important piece.

So some lessons learned here. If you have a car loan and you're having trouble making payments, do not take a deferment on the loan. You're just kicking the can down the road and potentially adding a huge payment at the end. What you should do instead is get rid of the loan as fast as possible. Now, the quickest way to do that might be to sell your car and use the profits plus any savings you have to buy a reliable used car in cash. Now, you might have to save up for a while, but it's worth it to avoid these sketchy lenders.

And if you're underwater on the car, meaning you owe more than what it's worth, I've got an article for you that walks you through exactly what to do. And I will link it in the description below. And remember, the best way to avoid this money trap is to stay away from auto loans altogether. So keep watching this video to see why I'm convinced that auto loans are America's number one wealth killer. Or click the link in the description below. Thanks for watching. We'll see you next time.