Qestion on 1992 Congress ruling of "Rule of 78" type Loans

[eclipset]

This question is applies to State of Florida Laws and Regulations

I am not sure I am posting this is the correct section.

I myself have lost my job, most all of my nest egg and am losing my home. My father turned to help me get through these tough times to offer me payoff of my current vehicle to alleviate that payment and will allow me to have a dependable vehicle while I get back on my feet after finding work. My father is a cosigner on the vehicle to help me get a lower interest rate since I had credit issues I was dealing with at the time due to a medical bill I never knew existed from some time ago. (I find this out when I go to get the car)
We contact the bank to perform a payoff to find that interest on the remainder of the load is owed (I learn this to be possibly the “Rule of 78”). I have rarely purchased car loans over my lifetime to understand vehicle lending and I guess put my faith in the system. So if the interest was acceptable and so was the payment I was happy. I have also made loan payoffs in the past with no issue of the one I have now. So in summary I didn’t know the questions to ask at the loan signing to be sure this was what I wanted. I did ask can I pay the loan off early, they say “Sure” but no educational statement on interest will be owed at payoff.

Needless to say when a hardworking middle class citizen finds this out they get angry, as I am. This is the banks way of taking advantage of a person’s situation. I feel it should be illegal; frankly I have found that this is illegal in many states. I have read of the 1992 Congress ruling that the Rule of 78 cannot be applied to loads over 61 months and applies to close end loans. This must not include auto loans.

My overall question is I am in the 4th year this April; does this mean I must wait till the 5th year to get a principal only payoff? Or does this not apply at all?
What can a person, like myself, can do to outlaw these types of lending all together. This type of lending should be considered malicious and not allowed. And if allowed the process must be explained in full layman’s terms for anyone to understand.

On a personal note: Banks should want to work with people with bad credit to help them cause they will spend more money and help the economy, but ripping the money out of their hands is not the way. I know this is a "learn their lesson tactic" but many of us have bad credit because of reasons not always our doing. In my case, I would be glad if I were the bank that the car is getting paid off so I wouldn’t have to deal with the repossession of the vehicle if times were to get tougher.

Thanks in advance for anyone that can give a moment to provide answers.

Regards,

Ron
Naples, FL.

 

[Antigone*]

This is basically a prepayment penalty. Nothing illegal about that. You should have looked at your contract prior to signing it.

Florida is not one of the states that outlaws Rule of 78 loans for installment loans of five years or less.

 

[efflandt]

You end up with the quoted interest rate over the normal term of the loan. Rule of 78's just pushes more of the interest to the front, so your principal goes down slower than with a straight APR on the balance. If you pay it off early (which you can do at any time), you end up paying a higher effective interest rate. So like Wirelessany1 says, basically a prepayment penalty.

I guess I am just curious if they will give you a payoff amount, or do they want you to pay the total of all remaining full payments, and then send you a refund?

Even worse is when they sneak credit life insurance into the loan payments without telling you. I first discovered that when my calculator came out with different payments than the dealer. While relating that during a later purchase at a different dealer, he said, "Oh, you don't want that?", tore up the forms and started over. In some cases you have to jump through hoops and sign a form to NOT get it.

 

[TimStudiesLaw]

Even if it were a simple interest loan there would be additional interest that accrues based on the APR, the principal balance and the date of last payment. Your payoff will never be the exact principal balance.

 

[eclipset]

This is basically a prepayment penalty. Nothing illegal about that. You should have looked at your contract prior to signing it.

Florida is not one of the states that outlaws Rule of 78 loans for installment loans of five years or less.

Sorry lost my way to this post to reply!!

It is the statement of five years or less. My loan was made for 6 years. I am sure they aren't breaking the law but I guess its best I understand so I can educate friends who are car shopping; seems I end up learning alot from friends when they solve problems similar and share. (thank god for forums!) I never had to worry when I had a 833 credit score but now my credit is bad due to hardship so I really have to watch how they take it to the delinquent citizen till I go down the hard road to credit repair.

I wish I were more educated on understanding the legal wording on loan papers. But I guess it would have been better to take the papers home and read all the print. They seem to pressure you through that whole signing process when buying a car just to get that profit. (sign here, intital here, sign here, etc.) I know how it works know becasue my friend just became a car salesman and they have tactics to get the $$$. Its a science like everything.

 

[eclipset]

By the way, Thanks for everyones input!!!!!