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This article was written by the Consumers Union Southwest Regional Office.
Finance companies often snare new borrowers with direct mail offers of instant cash. "Lead cards", like one mailed by Kwik Cash Loans to a Consumers Union employee living in a low income, minority neighborhood, offer easy access to loans of $50 to $400. "We find it hard to say 'NO'," the card declared. World Acceptance Corporation actively advertises loans for vacations and back-to-school needs through direct mail to its present and former borrowers.
Cash vouchers are also common. Mary B. of Houston received an unsolicited document in the mail for a loan of about $1000 from Norwest Financial. "Guaranteed good for a loan in the amount of $1,076.47. A check for the amount shown will be issued to you upon presentation of this fully completed Voucher, the required information, proper identification and proof of income." The voucher, which was actually the loan contract, laid out the terms of the loan, including the number of installments, the credit insurance, and the APR (31.5 percent). The borrower simply needed to complete and sign the document to receive the loan. A San Marcos consumer who received the same voucher forwarded it to the Office of Consumer Credit Commissioner. "How can you let something like the attached go on," the consumer wrote. "Folks who suffer from deals like these are the ones who can afford them the least!"
Verna Emery of Illinois sued American General Finance in 1995 after accepting a "$750.00 Cash Coupon" mailed to her home that turned out to be an offer to refinance her existing debt. The letter read: "Dear Verna: I have extra spending money for you. Does your car need a tune-up? Want to take a trip? Or, do you just want to pay off some of your bills? We can lend you money for whatever you need or want. You're a good customer. To thank you for your business, I've set aside $750 in your name. Just bring the coupon below into my office and if you qualify we could write your check on the spot. Or, call ahead and I'll have the check waiting for you. Make this month great with extra cash. Call me today˜I have money to loan." This cash offer turned out to be an offer to refinance her existing loan, borrowed six months before. The transaction, which netted Ms. Emery $200 in new cash, cost her about $1,200 in increased finance and other charges and increased her monthly payment by $20.
SOURCES: Direct mail card. Consumer complaint letters, Office of Consumer Credit Commissioner, August 1996. World Acceptance Corporation, Form 10-K, Item 1. Description of Business. Emery v. American General, 71 F.3d 1343 (7th Cir. 1995).
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