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Their paths crossed for the first time about eight years ago. Bennie Roberts was an illiterate, retired quarry worker, who owned a nice three-bedroom house free and clear. Bennie first met the manager of Associates First Capital Corp’s loan office in Charlottesville, Virginia, a few days after Roberts had stopped at a roadside meat stand and placed an ordered for a side of beef, a half pig, 30 chickens, 30 pounds of sausage and 30 pounds of bacon. He put $20 down and asked to finance the balance.
Enter the Associates’ manager … who drew up the papers for a meat loan of $1,250.
Four months later the manager recommended a consolidation loan to Roberts, one that would allow him to lump everything he owed into a single loan with a single payment. It sounded like a fine idea to Roberts and he printed his name on the dotted line.
Just three weeks later, the manager recommended a refinance of the new loan and again Roberts went for the idea.
Attorneys now representing Roberts have described what the manager of Associates was doing as “loan flipping,” a practice that produces added debt to the borrower but substantial fees to the person or office filling out the refinance papers. In Roberts’s case, his original loan was refinanced ten times in less than four years, generating $19,000 in loan fees (or “points”) for Associates. And even though Roberts realized just $23,000 in actual loaned money, his balance was—at the end of the ten refinances—a staggering $45,000. And Roberts, who lives on monthly social security and retirement stipends of just $841.00 was saddled with a 15-year loan, requiring payments of $633.28 per month.
The first refinancing, the consolidation, produced a loan balance of $9,349 and listed Roberts’s house as the collateral. The next refinance gave Roberts $1,868 in cash; the next $1,798 more in cash; the next $2,938 … and so on. In all, the ten loans also generated ten points each. Roberts was charged an amount equal to ten percent of the loan, which was added to the amount financed, in each instance—all ten of them. In fact, the tenth in the series added $1,043.50 to Roberts’s pockets, but $4,209.82 (the loan amount was at $40,671) in fees to Associates coffers. Besides the charges for points, Roberts was required to pay for a new title examination and new title insurance every single time new papers were drawn up.
Roberts’s attorneys, on behalf of their 74-year-old client, filed suit last year in Charlottesville. When all was said and done, Associates settled—forgiving the debt. Wrong-doing was denied by the loan company, and the series of loans was termed “unusual,” although not abusive.
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