Ask The Advisor: July 2015

Ask The Advisor: July 2015

Help! My Mentally Disabled Brother Was Target Of A Predatory Auto Loan!

Q: My brother, age 65, is cognitively impaired. He can’t read or understand finances, but he’s married, able to work and earns a modest living. He owns a small home that was purchased for him through a family trust. Recently he signed a loan for a 2013 Nissan with almost 60,000 miles — that cost $32,000 including financing. He signed the contract even though he can’t read or understand the amount he owes or how long it would take to repay.

He purchased it on his first trip to the dealership after receiving an offer in the mail of payments of $75 a month. Instead of a payment that low, though, he wound up owing $500+ a month for five years. His auto loan charges 18% interest. My brother couldn’t pass a credit check from a legitimate lender. He’s had numerous problems with debt collectors over the years, although he and his wife still own their home with no mortgage now. Do you have any advice?


A: Buying a car is fraught with pitfalls where anyone must tread carefully and thoroughly sleuth out hidden mechanical and financial defects. Indeed, it sounds as though your brother has been taken for a ride by a predatory auto loan. According to information found on — an organization that provides help and information about loans and managing debt — predatory lending is any lending practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that the borrower doesn’t need, doesn’t want, or can’t afford. In recent years, such sub-prime auto loans have soared, and now state and federal agencies are starting to look into some big name lenders who cater to people with less-than-perfect credit records.

Dealerships and lenders that use these tactics often target older consumers, low-income people with credit problems, and people with low “financial I.Q.s” by taking advantage of the borrower’s lack of understanding about loans, terms and finances in general. The lender makes money from charging excessively high interest rates and stacking terms in its favor, and from the profits when the vehicle is repossessed and resold, sometimes to multiple buyers.

To help your brother, you may need to get qualified legal advice. Lending and consumer protection laws vary by state. Here are six common signs of predatory lending:

  • Unlicensed loan offers through the mail, via telephone, or door-to-door. “Auto payments of $75 per month! Interest rates as low as 2.4 APR! Keys to the door of your next car!” It’s not unusual to find auto loan offers in your mailbox, but beware. Make sure any lender you work with is legitimate, and licensed.
  • Inadequate disclosure of costs. Does the lender hide or gloss over the costs? Are the terms appropriate or have the terms of the initial offer changed?
  • Abusive high interest rates offered to high-risk borrowers who are most likely to default. Does the lender suggest a loan because of “bad credit or no credit?” To qualify for the lowest loan costs, borrowers earn low interest rates with good credit histories. Stay clear of dealers and lenders who promise to put you behind the wheel regardless of your credit.
  • Junk fees. Is the loan loaded with add-on products, like “GAP” insurance, service contracts, or credit life insurance? These inflate the cost of the vehicle and loan size, as well as the potential loan kick - back for the dealer.
  • Rushed or pressured to sign papers. Is the salesman or dealer herding you into an office and telling you to sign now or lose your deal? That’s a sure sign it’s a deal worth missing.

If your brother was a victim of auto dealer fraud, you may want to look for an attorney who would be willing to work on a contingency basis. If fraud is proven, your brother may be allowed to surrender the unwanted vehicle and the court may order a refund of all payments made toward purchase in addition to canceling any outstanding loan balances. If your brother will have trouble affording an attorney, contact your local Area Agency on Aging or senior services department and ask about legal aid services in your area.


Sources: “Is There A Subprime Car Loan Bubble?” Bob Sullivan,, March 23, 2015.