by Clark Kauffman, Georgia Recorder [This article first appeared in the Georgia Recorder, republished with permission]
October 19, 2022

An Iowa couple who unwittingly purchased a seriously ill dog through a loan with an interest rate of 189% now wants lawmakers to protect consumers from a similar experience.

Jeff and Jennifer Bowman, whose story was first reported by the Washington Post, purchased a 12-week-old English bulldog in a Petland store in Iowa City three years ago.

The price for the puppy, which they later named Zeke, was $4,400. “They told us the price and I just about fell down on the floor,” Jennifer Bowman recalled. The couple hadn’t planned to spend anywhere near that much money on a new dog, but with Zeke, she said, it “was love at first sight.”

“They put us in a little room where we could sit with Zeke and he could run around, and we just fell in love with him,” Jeff Bowman said.

With the addition of taxes, a $300 “homecoming supply kit” and an Iowa Hawkeyes dog collar, the Bowman’s owed Petland a total of $5,001.07. The couple put down $500 and, with the help of the Petland staff, they signed papers financing the rest of the purchase through two separate loans – one for $1,500 and one for $3,000.

A Petland clerk cautioned the couple about the interest rate they would face if they didn’t pay off the $1,500 loan within 90 days.

“They did say, ‘Try to pay this off because after a certain point the interest rate will skyrocket,’” Jeff Bowman recalled. “But we didn’t know how much it would go up.”

‘Rent-a-bank’ loans avoid state caps on interest

Although Iowa’s interest rates are capped at 36%, the Bowmans later discovered that the 12-month, $1,500 loan, provided through a business called EasyPay, stipulated that if they did not pay off the loan within 90 days, an interest rate of 188.98% would be applied to the loan.

The loan documents, which include a federally mandated Truth in Lending Act disclosure statement, clearly state the precise terms of the deal — showing the Bowmans would have to pay $1,827 in financing charges to borrow $1,500, for a total payback of $3,327. EasyPay  would automatically extract $128 from the couple’s bank account every two weeks.

But that disclosure statement was one of several documents placed before the Bowmans that day, and the couple was more focused on Zeke than on the terms of the loan. In addition, they did not know Zeke had serious health problems that would lead to multiple, costly trips to the veterinarian that would impact their ability to pay off the loan.

The higher interest rate was made possible by EasyPay processing the loan through Transportation Alliance Bank, based in Utah. It’s a process that animal-welfare and consumer advocates call “rent-a-bank,” and it enables financing companies like EasyPay to route loans through out-of-state, federally regulated banks that don’t have to comply with interest-rate caps that are set by states.

The National Consumer Law Center says these “predatory” practices have resulted in hundreds of complaints.

Among them:

— A New Jersey consumer who bought a cocker spaniel and was charged 152% interest, which was five times the legal limit of 30% in New Jersey.

— A Georgia consumer who complained that the pet store didn’t tell her EasyPay’s finance charges amounted to an interest rate of 180%. “My puppy was supposed to cost $2,500 (and) now costs almost $7,000.”

— A Florida consumer who said he was left with damaged credit after buying a puppy that immediately fell ill and eventually died. “I only borrowed $2,200 … I owe $5,500 on my credit report, due to interest,” the consumer complained.

— Another Florida consumer purchased a Shih Tzu puppy that died after the family incurred $1,280 in vet bills. After the puppy died, a debt collector kept calling to collect the loan.

Last year, Congress adopted a resolution repealing a Trump-era rule that had been enacted by the Office of the Comptroller of the Currency and which facilitated such loans.

“In many states, these lenders are kept in check by caps on how much interest they can charge,” President Joe Biden said while signing the resolution. “But some loan sharks and online lenders have figured out how to get around these limits … by using a partnership with a bank to avoid the state cap and charging outrageous interest — some as high as 100 percent interest, which is astounding … The last administration let it happen, but we won’t.”

Eliminating the OCC’s rule hasn’t stopped the rent-a-bank process – and advocates say additional action by the Federal Deposit Insurance Corp. and Congress is still needed.

A coalition of consumer groups, including Public Citizen, the Public Interest Research Group and the Consumer Federation of America, have petitioned the FDIC, which regulates banks. The groups are urging the agency to halt the practice of banks serving as “fronts” for businesses they consider predatory lenders.

Earlier this year, they wrote to the FDIC and stated, “FDIC-supervised banks are helping predatory lenders make loans up to 225% APR that are illegal in almost every state … Rent-a-bank schemes have flourished at FDIC banks in the past few years, and it is time for that to come to an end.”

Zeke dies, but collection agencies continue to call

The Bowmans say the financial impact of the loans for Zeke was significant. “We almost lost our house,” Jennifer Bowman said.

When the couple realized the interest rate they’d be facing if they didn’t hurry to pay off the EasyPay loan, they sought help from Jeff’s mother, who paid off the balance using a credit card with a significantly lower interest rate.

As difficult as that was, it paled in comparison to the emotional and financial issues that Zeke’s health problems posed for the couple.

“It was just a couple of days after we brought him home that he started bleeding from his rear end,” Jennifer Bowman said. A series of diagnostic tests would eventually show Zeke suffered from Giardia, an intestinal infection caused by a microscopic parasite. Additional testing by a specialist showed Zeke had an abnormal kidney and likely wouldn’t make it to the age of 5.

“It was terrible,” Jennifer Bowman said. “I used to take him to puppy-training classes, but he couldn’t play too long because he would just get worn out. It was so hard to watch because he was so full of life and wanted to play. He was the best dog – just so happy.”

In February 2021, Zeke died of renal failure at the age of 20 months, with veterinary records describing a number of physical problems that included a history of allergic skin disease, gastrointestinal disturbances and respiratory issues.  A veterinarian later stated that Zeke’s death was a direct result of his “prior genetic and breeding history.”

Breeder has history of violations

Zeke’s American Canine Association records indicate he was born at Twin Birch Kennels, a breeding operation run by Lavern and Marietta Nolt of Charles City. The kennel has a history of regulatory issues, according to U.S. Department of Agriculture records.

The kennel’s most recent USDA inspection, in June, made note of several violations, including failure to provide adequate veterinary care for four English bulldog puppies that had weak hind legs, and failure to keep adequate identification and veterinary records.

In February, similar issues were noted by a USDA inspector who reported that several dogs at Twin Birch weren’t receiving adequate care, including a bulldog with a “large red growth” covering one-third of its right eye. “The dog has not been evaluated by a veterinarian,” the inspector reported, and the kennel had no plans to have the condition diagnosed or treated.

Petland officials reimbursed the Bowmans in full for Zeke’s purchase price, minus the financing charges, and for some of the couple’s veterinary bills. After Zeke died, the Bowmans stopped paying on the second of the two loans they had secured through Petland. To this day, Jennifer Bowman said, they continue to receive calls from a collection agency and their credit rating has taken a hit.

Federal legislation is stalled in Congress

In 2019, and in 2021, a bill was introduced in Congress to provide a permanent, national solution to the “rent-a-bank” issue by establishing a 36% interest rate cap that would apply to all lenders. But that proposal has faced stiff opposition from the finance industry and has yet to be approved by Congress.

With federal action stalled, some states have taken action. Illinois has banned high-interest loans and California now prohibits online pet stores — regardless of their physical location — from assisting in the financed purchase of dogs, cats or rabbits.

As for EasyPay, the company acknowledges its interest rates can be as high as 199%, but says it makes financing an option for people who otherwise wouldn’t even qualify for a loan.

“Many Americans are left behind by the traditional banking and credit system,” the company told the Washington Post. “EasyPay facilitates financing options to ensure that these consumers have a trusted and secure choice to access otherwise unavailable credit for pressing needs and discretionary purposes.”

Elizabeth Kunzelman, vice president of legislative and public affairs for Petland, said the Bowmans were “completely reimbursed” for Zeke’s purchase and the store “went above and beyond the warranty, even going back to the breeder to make sure the sire and dam weren’t bred again,” and then the store stopped purchasing from that breeder.

“The store decided to no longer use EasyPay in February of 2021, prior to the updated consumer credit policy, as they were not happy with the terms the company was providing,” Kunzelman added.

As for the Bowmans, they now have a new dog – one acquired from a friend, not from a dealer – but they still want others to know about Zeke and the financial and veterinary risks associated with puppy mills and pet financing.

“We’ve contacted the Better Business Bureau, the U.S. Department of Agriculture, the attorney general’s office – just so many people,” Jennifer Bowman said. “We’ve been trying to get Zeke’s story out there just so another family doesn’t go through what we went through.”

This story first appeared in the Iowa Capital Dispatch, a Georgia Recorder States Newsroom sibling outlet.

Georgia Recorder is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Georgia Recorder maintains editorial independence. Contact Editor John McCosh for questions: info@georgiarecorder.com. Follow Georgia Recorder on Facebook and Twitter.