The truth about high-interest loans: Hidden camera investigation (Marketplace)

could your six thousand dollar loan cost you twenty thousand dollars it's turning on shocking interest rates forty six point ninety three and forty six pounds it's almost a license to print money for them they want to keep collecting money what's really behind the sales pitch very shady i was really disappointed putting lenders to the test it's an abuse of our most vulnerable canadians need protection this is your marketplace [Music] this is the front of the house and this all had to be torn off the cement was was also rotten in bar head alberta teresa morton's giving us a tour of her hundred-year-old home so this whole back of the house to here all had to come off and we had already put the new kitchen in the cabinets the flooring so we just had to rip it all out she can laugh now but it's been a painful reno for teresa and her husband is it fair to call the backyard of your house a money pit yes for sure yeah so where the where those windows are up there that is the end of the original house and all we wanted to do was put this on that was it the 68 thousand dollar rental quote balloons into a 175 thousand dollar job way more than they borrowed from the bank and the nightmare gets worse her husband loses his well-paying oil and gas gig the bank won't lend more money and they can't cash out their investments so we didn't know what we're gonna do then help arrives in the mail this card came and it said you've been pre-approved for twenty thousand dollars so we just looked at each other and we were in the car the next day we were we were in there the offer is from a lender called fairstone financial but it comes at a huge cost the interest that they charged us was 27.99 that's more than 17 grand in interest over five years on top of the twenty thousand dollars when you hear an interest rate like that did your heart skip a beat absolutely if we had not been so desperate um there is no way we would have signed on a dotted line now we're heading into the world of high interest lending do you want me to turn it on going undercover with our marketplace tester mana we're ready she's checking out four lenders that offer big cash across the country and these aren't payday loans cash money up to ten thousand bucks up to 15 grand how much you can borrow how much the different interest rates are fair stone financial where the offer is up to 35 thousand dollars okay or a high risk lender and at easy financial up to forty five thousand dollars we need to select any day that we can take out the payment how much average are you looking for our tester wants to know the real cost of borrowing six thousand dollars yeah i'm looking at around six thousand and paying it back every two weeks over three years how does the process work watching on in toronto is money man alex haditashi he's built three mortgage companies from the ground up and he's lent a lot of people a lot of cash my companies have served over 200 000 canadians you deal with this every day every day okay seven days a week seven days a week so he knows interest rates and that's where we start so what's the interest 3.94 sorry 3.94 for a year 3.94 a year no like monthly if you calculate buying monthly and it would be 1.6 to 3.9 doesn't sound too brutal but alex sees it otherwise in my opinion they're all misleading numbers and you know uh they want to make their clients believe that hey it's not as bad as you think actually it's worse so it's 3.9 percent monthly but yearly is 46.93 most of our customers do get unfortunately 46.9 the interest rate would be about 39.99 okay is it really okay that's double what most credit cards charge how would you characterize those type of rates in my opinion those are predatory lending and in my opinion should never be allowed in this country yet sky-high rates up to 60 percent a year are legal in canada and it would help if this money marge sales rep knew how to explain them 46 yeah oh that's in the full loan so 46.9 percent is the full term full time so three years would cost 46 or each year 46 for the full three years okay so not each year no that would be chill uneducated untrained uh sales professional that either doesn't know what's talking about or misleading the client completely when i hear that i hear that she is expected to pay 46.9 over three years absolutely is that how interest works i know it doesn't uh is the annual interest rate that you charge with 46 percent every year you charge them 46 percent at that rate on a 6 000 loan money mart would make more than five thousand dollars in interest in total mena would have to pay back more than eleven thousand dollars if you qualify for the maximum investment same thing at easy financial she's around 5250.98 interest exorbitant outrageous is okay to make money obviously but uh doesn't mean you have to uh you know slaughter your clients and your fellow citizens now to be fair alex the companies will say they've got to charge these sky-high rates because these are risky loans to begin with how does that sit with you i think these landers do provide a service however you know you still could be extremely profitable by charging interest rates off 20 25 or even 30 percent take easy financial for example we find out it borrows at five percent lends out at more than 40 percent on average and pockets the difference they know when you're coming in there that you're there because you cannot go to a traditional lender so i think that it's almost a license to print money for them the company teresa used fairstone financial says it charges its clients high interest rates because they're risky and they may default in their loans easy financial tells us it offers canadians with bad credit find affordable solutions cash money tells us it proudly offers credit to under banked canadians and moneymart well this company tells us that employee they weren't trying to mislead our tester but they do admit that interest explanation could have been handled better none of these companies would discuss their business with us on camera back on hidden camera if you want to pay more you can come here to the store and play more we're told not to worry about interest because we can pay down our loan faster the loan is completely open you can pay it off at any time even pay it off early anytime any time without paying additional interest or anything like that if you want that one two three months you know then pay me out in full that's fine because you don't get penalized for it most of people take loan like 10 000 and after 2-3 months they pay it off how realistic is it for someone to pay off a ten thousand dollar loan in two or three months it is not usually people who borrow this money either new immigrants or students or young people or people who have emergency and they don't make that type of money makes it almost impossible a few blocks away it was sad and funny at the same time artist marty smith couldn't pay off his moneymart loan early and says when he went to the store to close the thousand dollar loan they wouldn't let him you wanted to pay cash yeah you want to finish it off steal the deal close it off final payment all done then i couldn't do that you're dealing with a person on a nurse i have a glass wall and she won't take my payment he says they wouldn't tell him how much he owed and said the payment had to come from his bank i wouldn't made a 70 payment i would have gone and made the 113 payment if the woman behind the glass would take it and say it was a final payment but they wouldn't take your cash as far as i could tell you can't close the loan and they don't want you to make a final payment because they want to keep collecting money from you so then this is the front door seems that's what happens to teresa too when her bank offers money at a lower rate she tries to settle up with fair stone yep they said there's no penalty for early payment so we've got the exact amount that they told us we gave them the date we were coming in with the money but after she and her husband pay by bank draft they're charged another 180 dollars in interest and it isn't over yet i went back over all my transactions and i went oh look at they took another payment after we paid them already more than 600 is taken from her bank account they were unapologetic and um just said well we'll get a hold of head office and and ask them to give it back to you and i said well then please stop taking it out i can't take anymore a month later fairstone pays theresa back saying it took that extra payment because it couldn't cancel the automatic withdrawal in time as for that 180 charge no explanation and no refund for teresa it's very unfortunate is what they've done is really wrong immoral irresponsible and they should be ashamed of themselves just feel rushed into signing them so that is going to cost an extra 10 to 15 dollars a month but not when we do the math i didn't know that got a story you think marketplace should investigate next tell us about it on email twitter or facebook this is your marketplace in chatham ontario karen fornelier's been off work since mid-march thanks to the covid pandemic tell you like your sister with four kids no school and no child care she's had to stay home while her husband keeps working and she's had to battle over her five thousand dollar high interest loan so these are the two letters that i got from the insurance we are writing a response to you involuntary unemployment claim way back before the pandemic karen borrowed from fairstone and got talked into buying loan protection disability and life insurance i actually asked him a couple times like is this for real like is it like if i do lose my job is it going to be like no hassle or you know like i will i have to like do anything no no it's going to be like a quick you know just let us know your situation and then you have to kind of maybe show proof that you're not working because of the pandemic many people take that insurance on let's say if anything hidden happen at work when you get easier the perfection time does come from the pace our tester hears a lot about insurance we do offer loan protection we do offer life disability and unemployment we're gonna have a loan protection plan what's in it alex for the companies to sell these insurance plans to consumers money uh they get very generous uh referral fees most times if you know they're charging you 100 per month for the next three years i would say a good chunk of that's actually coming in as a kickback at fairstone seems insurance just gets rolled into the payment quote it's an additional cost right the the central 6875 that i gave you so it's already included is almost made it sound like it's mandatory you should take it and there's no reason for you not to take it like it's a package yeah and most customers they're like fear factor has been used on them you could lose your job you should push it better take this thing when kobit hits karen says she has to stop working to stay home with the kids and she stops paying for her loan counting on insurance to kick in but your claim does not qualify for involuntary unemployment benefits the insurance won't cover her loan i was really disappointed because clearly i'm not working and i had given them evidence and you know records showing that i wasn't working and even my last pay stub disappointing because insurance it ain't cheap despite what karen says she was told he said that it's going to cost an extra 10 to 15 dollars a month it's actually 115 dollars per month [Music] okay i didn't know that [Music] over five years she'd pay nearly seven thousand dollars on insurance because guess what fairstone charges interest on that too it's not clearly spelled out in the documents she had to sign on the spot you just feel rushed into signing them and um not able to read them you basically blink and they're gone when we tell ferris stone about karen they say they tried to help her with her claim they also say that staff walked her through the optional insurance when she bought it and that they never promised she would qualify our tester wants to see a contract um actually just just one last thing before signing anything do you have like any copy that i could look at no it happens everywhere if you can show me the contract from now or or like a template about it i cannot give you someone else contract right do you have like a copy that i could take a look at no okay so i apply and i sign the form and the contract and then like when will i find out about the details though right okay after you sign on the dotted line wow once you sign on the dotted line they'll give you a contract that they don't want consumers to look at it a day or two days ahead of time because they would once they get it they know there's a good chance that customer is not going to sign that contract you can get the money lickety-split no problem but to see things in writing that's not possible is uh very non-transparent and very shady it's in my opinion a extremely wrong and bad way to do business and it's almost like a loan sharking at fairstone our tester can't even get a printout of loan quotes no i'm sorry can you write it down so she has some idea yeah at least just so that if we're alone or something else no we just need to we need the numbers it's my first time trying alone so i like don't know so this is based on six thousand dollars 39.99 interest rate yeah 68.75 with the insurances wow sticky pads so no contract until after you sign on the dotted line but we did get this very official looking yellow sticky i actually blame our government for this this is beyond crazy or negligent what's the real cost of that six thousand dollar loan we do the math do you have to pay extra for that and who will stand up for canadians make all these institutions accountable fighting for answers on your marketplace get more marketplace sign up for our weekly newsletter at cbc.ca marketplace this is your marketplace we're visiting high interest lenders if she wanted to borrow let's say about 6 000 bucks to figure out the real cost of doing business with them pay back over three years every two weeks cash money gives us a payment estimate but the numbers seem fishy to our expert sorry just one second some expert math then alex haditaji drops a bombshell so that's uh gonna take me approximately nine years to pay that money off and around twenty thousand dollars we get another opinion that confirms it'd take a long time to pay off this debt when you ask for three years use asking hey if i make those payments you're telling me i will be free and clear after three years and that's not the numbers and that's not accurate on what they represented cash money won't comment about it taking nine years to pay off that six thousand dollar loan but the company does say it's very clear about how its minimum payments work and that its customers often pay back their loans early what do you think alex of all the hidden camera footage that we just showed you it's tough canadians need protections from all across the country and it should be regulated federally so we want to talk to christian freeland on camera the coronavirus is still with us as minister of finance she could push to lower that 60 percent rate and regulate the industry the economic challenge created by the coronavirus is hitting women particularly hard her office says she's busy but in edmonton new brunswick senator pereira ringette wants to talk it's an abuse of our most vulnerable like nobody's acting on behalf of canadians in order to make all these uh uh this institution accountable i'm advocating that the criminal interest rate for years she's been a lone voice in parliament would be capped at 20 plus the bank of canada over right overnight rate fighting to bring down the legal interest rate so would it be fair to say this has been like pushing a rock up a hill or what i would say more an elephant up the hill an elephant off the hill okay she's not pleased by the hidden camera it's an abusive process that needs to be curtailed it needs to be curtailed that cash money payment plan shocks her approximately nine years to pay that money off well nine years and twenty thousand dollars i i hope all my parliamentary colleagues are listening to this because i'm gonna need their support in order to lower that criminal interest rate create greater transparencies in those those institutions do you have enough fight left in you to fight this fight i was very tired of fighting that fight but what you've just shown me brings back the fighter in me the senator says the government must act now during this pandemic winter we haven't seen the dire financial situation that canadian will be facing come the springtime i believe that we're going to have a lot of horror stories and canadians deserve better do [Music] got a story you think marketplace should investigate next tell us about it on email twitter or facebook struggling with your mental health during the pandemic having trouble finding the help you need online ever tried an app well tell us about it marketplace at cbc.ca what's lurking in your air we could see what was in this air at a microscopic level it's a chemical suit surprising it's scary air purifiers put to the test airflow and efficiency they're important are you ready to find out the results i would have expected a little bit better for the money that's really disappointing and home hacks you can't afford to miss and that's all you need to make an airplane breathe clean next week on your marketplace you

Channel: CBC News

Views: 348,308

Rating: 4.8456945 out of 5

Keywords: Alternative lenders, loans, high-interest loans, interest, interest rate, Cash Money, Fairstone Financial, Easy Financial, Money Mart, CBC, CBC News, CBC Marketplace, Charlsie Agro, Canada, money, investment, bills, finance, business, company, consumer, consumer rights, Hidden Camera, Investigation, journalism

Id: Ea2-qytKw6Q

Length: 22min 55sec (1375 seconds)

Published: Fri Jan 29 2021