I think of myself as a garden-variety Democratic voter, neither Joe Manchin nor a Bernie Bro, but once in a while something happens that nudges me toward Bernie or, indulging daydreams, into the arms of AOC. I recently had a $15,000 home repair—$15,350, to be exact, for a new "combi boiler." (I live in a 100-year-old house with radiators for heat; there's no separate hot water heater, the "combi" does it all.) I was going to transfer money around in order to write a check that wouldn't bounce, but then the company doing the work told me they offered 0% financing for 18 months. You can get about 5% on bank deposits these days, so I thought I might as well pay them slow, and I took the financing.
First sort of weird thing that happened is I got in the mail a credit card issued by Wells Fargo. So it's not actually the HVAC company that "offers 0% financing for 18 months." Rather, the HVAC company has some arrangement whereby they toss over to Wells Fargo their customers who don't have, say, 15 grand lying around. Uh-oh. I'm not using that credit card (though some people, especially if they're more desperate than I, might).
Not long after that I get a statement in the mail. It's four pages long, very small print, and includes all the terms, which are apparently somewhat more complicated than "0% for 18 months," unless perhaps what happens after 18 months is positively Byzantine. I sit down to read it. Have to take off my glasses and hold the paper with the tiny print close to my face—ok, whatever, I'm old and both near- and far-sighted, but it's almost as if they want you to give up on comprehending. As you persist, so does the suspicion that the unknown authors don't want you to understand. I think I'm a pretty good reader, and I wouldn't say the document is impenetrable, but it certainly tends in that direction. Lots of people wouldn't understand it, or would grow weary of trying. For one thing, it uses a sort of private vocabulary for rather ordinary concepts, and defines these terms elsewhere within the document, so that instead of just reading something that makes sense you have to scan around to figure out what the weird stuff means and then make the needed substitutions as you forge ahead. There are many sentences along the line of, "Please note that 'accrued interest' may also be referred to as 'deferred interest' and 'subaccount(s)' may also be referred to as 'balances.'" Noted, thanks!
Well, I put in some time and feel confident that I grasp the principal details of the shit deal Wells Fargo has for the customers of their friends in the HVAC business.
The reason they can say "0% for 18 months" is that I pay no interest if I give them something every month and the whole $15,350 by the "special terms end date," which is what they call the end of the 18-month period. That's it for the good news. I said the print is small and the language hard to understand, but one exception to that is a box at the upper-right of page 1 that says "Minimum Payment Due-----$505.75." I'm sure a common reaction to this information is, "Well, why would I pay them more than the minimum?" But notice that $505.75 x 18 = $9103.50 < $15,350. By paying the monthly minimum, you have only paid back about 60% of the debt at the "special terms end date," and now you pay interest.
The interest rate is 28.99%.
I guess that in my innocence I would have thought it was illegal to charge that amount of interest. It should be, but . . . lobbyists, Republicans, probably Joe Manchin. Willing lender, willing borrower, some will say. Not really. Remember, I got steered into this deal because I needed to heat my house and have hot water. I'm going to pay them off within 18 months but lots of people couldn't. According to Fortune, 57% of Americans cannot afford an unexpected $1000 expense. Wells Fargo: "Let's get these people to pay us for the rest of their lives!"
Send them a credit card in case they'd like to make some additional purchases.
I've now made two $900 payments, which is why my "special terms balance" on the portion of the statement shown below is down to $13,550.
But the "deferred interest charge" of $502.65 puzzled me until I read, on a different page:
We begin accruing interest on a purchase with No Interest if Paid in Full Terms on the date the purchase posts to your Account. We calculate interest on the purchase balance. This amount is called the deferred interest charge (see "Deferred Interest Charges" shown in the SPECIAL TERMS CALCULATION section of your statement). The deferred interest charge will not be added to the regular balance unless you do not pay the balance in full by the end of the special terms period (see Special Terms End Date shown in the SPECIAL TERMS CALCULATION section of your statement). You may avoid interest on the balance by paying it in full before the end of the special terms period.
This means that, while I am paying them at a rate that will result in no interest, they are keeping track of what the interest payment would be on the unpaid balance. If my rate of pay slows, and there is outstanding debt when the "special terms end date" arrives, the 28.99% is not applied against only the amount that remains unpaid at that time. Instead, all the "deferred interest" is added to the balance due, going back to the first month, when the 28.99% was applied to an average daily balance of roughly $15,000, plus the next month, when the exorbitant rate was calculated on an average daily balance of about $14,000, and so on—a total of thousands of dollars of interest, since the rate is usurious. The impact upon someone seduced into making the “minimum payment” would be calamitous.
And that's if they don't accept the invitation to use the credit card sent to them in the mail.
A perennial argument between "liberals" and "conservatives" concerns the degree to which private enterprise should be overseen and regulated by the government. "Get big government off our backs!" cries one side—because, it appears to me, they want to be free to boost their bottom line by gouging vulnerable people of modest means who are prone to landing in desperate situations. And they're succeeding—they're gouging them. I mean, I assume this loan they have me in isn't breaking any laws, and in that case they aren't being regulated enough.
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