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Podcast: ‘No Credit? Need Credit?’ It’ll Cost You

It’s a scene that plays out all across the country: a worker with steady income but little credit – say, a young service member – walks into a “discount” store advertising guaranteed credit toward furniture, electronics and jewelry.

Everything is advertised in terms of installments, says ProPublica’s Paul Kiel, joining Editor-In-Chief Steve Engelberg in the podcast studio to talk about his latest investigation. So, for example, a bedroom set advertised at USA Discounters for $49 a month seems like a great deal.

But then, Kiel says, “you kind of lean down, and you squint and it says, ‘Actually this is 24 payments at this amount, and this includes 24 percent interest.’ ” And even then, Kiel says, you can’t easily do the math and compare prices at other retailers. “First of all, you’re not even sure how much you’re paying for the underlying item.”

The end result? A $600 computer, for example, ends up costing $1,800, and fees and interest bring the total to $3,000. And when the soldier falls behind on payments, USA Discounters brings suit in Virginia, no matter where the item was bought.

“This is a situation where a soldier goes into a store in Texas, and then the contract says, we will sue you in Virginia,” Kiel says. It’s convenient for USA Discounters, which is based in Virginia, not the borrower. Since 2006, the company has filed more than 13,470 suits and almost always wins, Kiel’s reporting shows.

Various laws put in place to protect consumers – and particularly service members – have loopholes that allow lenders to continue these types of practices. In Virginia, the plaintiff can even choose the legally mandated lawyer for service members, raising doubts about their ability to really fight for the service member, who might be stationed overseas when the suit is served.

Engelberg agrees: “It doesn’t sound like you’re getting any junkyard dogs representing these people here.”

Hear the full podcast – which also touches on Kiel’s new article on a company skirting new title-loan laws in Florida – on SoundCloudiTunes or Stitcher. You can also check out the full Debt Inc. series here.

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