- Report: #104215
Complaint Review: Arcadia Financial - Copell Texas
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Arcadia Financial
508 Wrangler Drive Copell, 75019-4934 Texas, U.S.A.
Phone:
888-331-2886
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Arcadia Trans South Financial ripoff used Rule of 78 contract, which was misrepresented to me Copell Texas
My rip-off report is probably very similar to many other victims of this financial organization.
I bought an 2000 Oldsmobile Bravada SUV from Enterprise Car Sales in October 2000. At that time, I signed a contract for an 18% percentage rate, due to my bad credit history, and was told that I could refinance this loan after a year or so of establishing payments on time. Unfortunately, I did not read the "fine print" on the back of the contract.
I have been paying the payments on this automobile since November 2000 (and I paid a $1000 payment down) of $610.73/monthly, on a $24,900 automobile. The total payout on the paperwork was over $36,000 (of course, I "assumed" incorrectly as I have learned, that meant you did not have to pay the interest to the end of the contract if it was paid in full early).
The actual payout on this loan as of today, minus the interest, should be around $6,000.
My vehicle was totaled by State Farm after a young lady rear-ended me on a busy street, where I was stopped behind a number of other autos. Several cars were damaged; but mine was damaged beyond 75% of the value of the automobile. So, State Farm declared it totaled, which should have been fine with me. They offered what I thought was a generous settlement(it should have been enough to pay off the principal of the loan, plus give me a downpayment on a new automobile).
When State Farm contacted Arcadia, they were told that the total payoff was over $11,000. I knew immediately that this included all the interest to the end of the contract. After speaking with numerous people at Arcadia, an attorney, the CFO of a corporation, and the finance officer at an auto dealership, I learned that Arcadia's contracts fall under the "rule of 78", which means the client (me, in this case) has to pay the TOTAL amount of the loan, regardless of when it is paid in full.
You would think this would be an illegal practice for both the lender and the auto dealer (who, by the way, knows when he has you sign this contract that you are stuck with Arcadia forever because no other lender will refinance this car at any interest rate because they loan, plus interest and any other charges, must be paid IN FULL before they will release the title).
The auto dealer finance manager I spoke with, told me that his dealership NO LONGER accepted this type of contract. They quit using them later in 2000. I am wondering if there was legislation of some sort to stop this practice, or if there were lawsuits take to the Supreme Court, where a ruling was made to stop this type of loan from being offered to the unwary consumer.
When I spoke with Darrin Miller in "collections" at Arcadia, and asked him if Arcadia still was using the Rule of 78 contracts, he said he "did not know". I told him that was ridiculous, that of course, he knows what type of contracts they offer or he could not legally collect anything from anyone. He would not give me any information.
The only people at Arcadia who have been informative or helpful are the employees in the Physical Damages department. Of course, they want to collect on the vehicle, so they are anxious to please the consumer as much as they can. Unfortunately, they do not make the decision regarding contracts or payoffs, other than to give the insurance company a total dollar amount (which is given to them by the collections department).
It is impossible to get the name of any corporate officer of this firm. Most of the employees don't even know anyone to contact in any other department other than theirs. Many of them don't make any effort to return your telephone calls or cannot give you any viable information when they do.
The address I put on the form you require is one that I got off a recording at one of the numbers I called. They have so many addresses and phone numbers - I can provide you with several given to me by different people in different departments, that it is impossible to say where their offices actually are.
If anyone has any information about the Rule of 78 and whether there are any legal grounds to take action against Arcadia to release the title of this vehicle for the fair and equitable amount due, minus the interest, please contact me.
Bettie
Memphis, Tennessee
U.S.A.
Click here to read other Rip Off Reports on Arcadia Financial
I bought an 2000 Oldsmobile Bravada SUV from Enterprise Car Sales in October 2000. At that time, I signed a contract for an 18% percentage rate, due to my bad credit history, and was told that I could refinance this loan after a year or so of establishing payments on time. Unfortunately, I did not read the "fine print" on the back of the contract.
I have been paying the payments on this automobile since November 2000 (and I paid a $1000 payment down) of $610.73/monthly, on a $24,900 automobile. The total payout on the paperwork was over $36,000 (of course, I "assumed" incorrectly as I have learned, that meant you did not have to pay the interest to the end of the contract if it was paid in full early).
The actual payout on this loan as of today, minus the interest, should be around $6,000.
My vehicle was totaled by State Farm after a young lady rear-ended me on a busy street, where I was stopped behind a number of other autos. Several cars were damaged; but mine was damaged beyond 75% of the value of the automobile. So, State Farm declared it totaled, which should have been fine with me. They offered what I thought was a generous settlement(it should have been enough to pay off the principal of the loan, plus give me a downpayment on a new automobile).
When State Farm contacted Arcadia, they were told that the total payoff was over $11,000. I knew immediately that this included all the interest to the end of the contract. After speaking with numerous people at Arcadia, an attorney, the CFO of a corporation, and the finance officer at an auto dealership, I learned that Arcadia's contracts fall under the "rule of 78", which means the client (me, in this case) has to pay the TOTAL amount of the loan, regardless of when it is paid in full.
You would think this would be an illegal practice for both the lender and the auto dealer (who, by the way, knows when he has you sign this contract that you are stuck with Arcadia forever because no other lender will refinance this car at any interest rate because they loan, plus interest and any other charges, must be paid IN FULL before they will release the title).
The auto dealer finance manager I spoke with, told me that his dealership NO LONGER accepted this type of contract. They quit using them later in 2000. I am wondering if there was legislation of some sort to stop this practice, or if there were lawsuits take to the Supreme Court, where a ruling was made to stop this type of loan from being offered to the unwary consumer.
When I spoke with Darrin Miller in "collections" at Arcadia, and asked him if Arcadia still was using the Rule of 78 contracts, he said he "did not know". I told him that was ridiculous, that of course, he knows what type of contracts they offer or he could not legally collect anything from anyone. He would not give me any information.
The only people at Arcadia who have been informative or helpful are the employees in the Physical Damages department. Of course, they want to collect on the vehicle, so they are anxious to please the consumer as much as they can. Unfortunately, they do not make the decision regarding contracts or payoffs, other than to give the insurance company a total dollar amount (which is given to them by the collections department).
It is impossible to get the name of any corporate officer of this firm. Most of the employees don't even know anyone to contact in any other department other than theirs. Many of them don't make any effort to return your telephone calls or cannot give you any viable information when they do.
The address I put on the form you require is one that I got off a recording at one of the numbers I called. They have so many addresses and phone numbers - I can provide you with several given to me by different people in different departments, that it is impossible to say where their offices actually are.
If anyone has any information about the Rule of 78 and whether there are any legal grounds to take action against Arcadia to release the title of this vehicle for the fair and equitable amount due, minus the interest, please contact me.
Bettie
Memphis, Tennessee
U.S.A.
Click here to read other Rip Off Reports on Arcadia Financial
1 Updates & Rebuttals
Ralph
Sparks,Nevada,
U.S.A.
Rule 78 If you don't terminate the loan early, simple interest loans and Rule of 78 loans will be equivalent
#2Consumer Comment
Sun, September 12, 2004
The standard loan is called "simple interest". You borrow some money and at the end of the period you pay it back plus interest. For longer term loans, you make periodic payments. With some consumer loans, especially with auto loans, you may encounter a different type of loan which mentions the "Rule of 78". It is a different way of deciding how much of each monthly payment is interest and how much is principal. If you don't terminate the loan early, simple interest loans and Rule of 78 loans will be equivalent. You will pay the same amount and get the interest rate quoted. However, if you pay off the loan early, you will end up paying more interest with a Rule of 78 loan than with the corresponding "simple interest" loan. For that reason, you should not take loans computed on the "Rule of 78". Here is a simple auto loan with round numbers: Amount of loan: $10,000 Interest rate: 12% a year (which is 1% a month) Length of loan: 1 year (12 months) Simple interest says that after one month has gone by, you have borrowed the $10,000 for 1/12 of a year and you own interest of 12%/12 or 1% which is $100. The rest of your payment goes to decreasing the principal. The next month you have borrowed $9211.51 for a month and own $92.12 in interest. After paying the interest, the rest of your payment goes to pay off the principal you borrowed. Figuring out the payments for a simple interest loan is a job for a loan calculator. In our example, it says that the monthly payment is $888.49. Over the life of the loan you will pay $661.85 in interest. On the last payment you make, you will have borrowed $879.67 for one month and owe $8.80 in interest. Notice that your final payment is almost all repayment of principal. If you look at each interest payment, it decreases each month. If you graphed the monthly interest payments, they would form a slight curve. OK, now let's do the same loan as a Rule of 78 loan: Amount of loan: $10,000 Total interest due: $661.85 (same as above) Monthly payment: $888.49 (same as above) Number of payments: 12 Sum of the integers from 1 to 12: 78 (the magic number) First month's interest: 12/78 times $661.85 Second month's interest: 11/78 times $661.85 Third month's interest: 10/78 times $661.85 ... Last month's interest: 1/78 times $661.85 If you were to graph the interest payments, they would form a straight line. If you were to pay the loan off early, you would have to pay a little extra because the initial payments attribute too much to interest, and too little to principal. How much does it matter? In our example, the worst it would matter is month 5 where the difference between simple interest and Rule of 78 is $4.01. However, our example was chosen to have round numbers and a 1 year loan. How much does it matter in a typical auto loan? Consider the following: Amount of loan: $30,000 Interest rate: 7.3% a year Length of loan: 4 years (48 months) Monthly payment: $722.57 If you pay this loan off early, you will always pay more with a Rule Of 78 loan than with a simple interest loan. Between months 7 and 29 you will be paying at least $46 more. Month 17 has you pay $66 more. Is $46 - $66 real money to you? Here are some related web sites: * Rule of 78 calculator * Article on Rule of 78 and why it is bad for the consumer * A White Paper written by Morris A. Nunes, Attorney * bankrate.com -- a good place to start if you are thinking about a loan
