Who’s Afraid of Captive Finance?
If you think the factors that determine your credit score are complicated, wait until you try to figure out all the moving parts that determine how much you pay for a loan. It is not only about your credit score, although that plays a role in setting the interest rate for the loan. Meanwhile, macroeconomic factors are also at play, such as the federal interest rate, which changes according to general economic conditions. Furthermore, the law gives lenders a wide berth to add lots of other fees to your loan, and only in the most egregious cases of abusive business practices does the Consumer Financial Protection Bureau (CFPB) order lenders to refund the fees that they had no business making consumers pay in the first place. Likewise, different types of lenders have their own ways of doing things, whether it is setting due dates for repayment or charging fees. You have probably borrowed money from a captive lender at some point, even if this is your first time hearing the term captive finance or captive lending. If you are struggling to pay debts that you owe to captive lenders, contact a Plantation debt lawyer.
What Is Captive Finance, Anyway?
A captive finance company, also known as a captive lender, is a finance company wholly owned by a larger company, known as the parent company. Its activities are to provide financial products directly connected to the parent company. The financing departments of some car manufacturers are captive lenders; these include Ford Motor Credit Company, American Honda Finance, and Toyota Financial Services. Another common scenario in which captive lenders operate is retail store credit cards. The retail chain is the parent company, and the subsidiary that manages the credit card accounts is a captive lender.
The advantages of captive finance are obvious from the perspective of the parent company. It does not have to share the proceeds of interest payments and late fees with third parties. Furthermore, it does not have to price its financial products competitively, because consumers who wish to finance the purchase of a car have little choice but to go through the dealership’s financial services company. Another way in which captive lenders are not especially consumer friendly is that the repayment terms on loans tend to be shorter, so the monthly payments tend to be higher.
Captive Finance Bots Are as Scary as They Sound
By now, Floridians are used to scary news coming out of the Alligator State, but this is unnerving, even by Florida standards. HGreg, a used car retailer based in Florida, has started employing artificial intelligence to handle underwriting tasks such as deciding how much you will pay for your car loan. The auto loan industry just got even less human.
Work With a Debt Lawyer About Dealing With Captive Finance Debt
A South Florida debt lawyer can help you if debts that you owe to captive lenders are holding your credit score captive. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.