It's called negative amortization and it's legal.
Although I think a customer would have to be really stupid to sign an agreement like that. Truth in Lending Law requires that the financial details of the loan be spelled out prominently in the loan contract.
Properly written, it should be readily apparent to a customer that the debt would never be paid.
And if the contract doesn't specify the loan factors, a customer would have to be equally stupid to sign it.
I use the word "stupid" loosely because every day I read about people signing things without reading and understanding what they are signing and often not even getting a copy. So, yes, I'm sure it's quite possible that there are stupid people out there that would get into a negative amortization contract.
Did this actually happen to somebody and now that somebody is looking for a way out?
By the way, there is nothing preventing a customer from making a higher than stated payment to get the debt paid off quicker and there are amortization calculators all over the internet that can be used to figure out what that payment should be.
