Attorney general sues Fayetteville business over vehicle loans
Posted on Friday, August 4, 2006
Arkansas Attorney General Mike Beebe filed a suit Thursday against Fayetteville business Quick Kar Sales and its owner, Nora Sims.
Beebe alleges that Sims violated the Arkansas Deceptive Trade Practices Act.
The lawsuit is over the practice of issuing “ title-pawn” loans, which are illegal, according to a release issued by Matt DeCample, Beebe’s spokesman.
“ This company was not only making illegal loans, they went as far as to hang a large sign out front advertising them, ” Beebe stated in the release. “ This fraudulent scheme took advantage of consumers already in financial trouble and profited from their misfortune. ”
The business, located at 2718 N. College Ave., offered loans to customers that owned cars that were not subject to a lien. The primary advertising for the business was a large sign that read “ Need Money ?? Need Money ?? Cash for titles & You Keep the Car. ”
The suit claims that Sims offered high-interest, short-term loans, which involved a person selling their vehicle to the business, which then immediately sold it back to them for a higher rate than the value of the loan.
Included in the filing is information about resident Kathrun Baughman, who sold her 1994 Chevrolet to the business for $ 350 and purchased it back for $ 550. The return sale was apparently financed with a “ document fee” of $ 50 being added to the cost.
According to the included conditional sales security agreement and federal Truth in Lending disclosure statement, Baughman financed $ 570, and though the document did not include any finance charges, she was obligated to make 15 installments of $ 40, which comes to $ 600.
Although the statement gives an annual percentage rate of zero, Baughman’s effective APR is greater than 200 percent, according the suit, which states other such rates exceeded 300 percent.
In addition to the high interest rates, customers were allegedly threatened with seizure of their vehicles if they did not make payments on time. To avoid seizure, customers had to pay “ late fees” or “ call off” fees, which were typically $ 125, though in some cases the vehicles were seized, according to the suit.
Beebe is seeking an injunction, restitution and civil penalties of $ 10, 000 for each violation.
DeCample said Sims had been advised to cease the practices but continued to do so, which prompted the lawsuit.
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