Larry W. Smith / EPA / Landov
If you are visiting a local mall or a downtown shopping street, it is not difficult to find a store where customers can rent-buy. That is, you can pay over time and eventually after a few big fees a flat screen TV or living room set is yours.
Well, now there is a way to do it for a smartphone. A Silicon Valley startup called Better finance allows almost everyone to buy the latest iPhone or Samsung Galaxy. It has raised millions of dollars from some of the most respected tech investors, like PayPal and Venrock.
But according to public records reviewed by NPR, the true cost of the deal is unclear to many customers.
A new loan business
Better Finance CEO Ryan Gilbert said he noticed a problem in retail stores: “When a consumer stands in front of a salesperson and wants to buy an iPhone or Samsung phone today, they want to walk out of the store with it. telephone. “
But not everyone has the money, and many people cannot get credit from the phone company. Gilbert therefore created a new program called SmartPay.
“We are currently in around 5,000 active stores,” he says.
Buyers give their social security numbers and are evaluated according to a formula created by the company. It’s not a traditional credit score, and it gets approved in under three minutes on the Internet. Customers can instantly purchase the phone of their dreams, and even a cute case and accessories.
Better Finance earns money by charging fees and taking money directly from the customer’s bank account.
So for a phone purchased over, say, a 10-month period, “you’re paying off a product of $ 900, or about $ 150 per month, for the duration,” says Gilbert.
After 10 months, that’s an increase of almost 70 percent. Do people really know they are signing up for this?
“Oh, absolutely,” Gilbert said. “I mean, this is a company where disclosure is 100% the rule. And there are no shortcuts in that regard.”
But when you look at how he works inside stores, like retailer MetroPCS, it is a shortcut.
“They said they were working with this SmartPay company and I could get approval for up to $ 700,” says Michael Atchley, a customer from Fort Worth, Texas. “But also with SmartPay, I have an identical 90 day payment policy.”
The policy means you have 90 days to pay off the full loan amount without charge. Atchley says he wasn’t even in the store when he got it; he had called his local MetroPCS from work when his old phone broke.
“I never signed anything,” said Atchley. “I just believed the representative’s word that what they were going to put in place was exactly as he said.”
It was only after Atchley got his Samsung Galaxy back Note 2 that he received an email from SmartPay.
“He said I actually had a 60 days same as the cash policy, which wasn’t what I was sold, ”he says.
It was a whole month shorter than Atchley had expected.
NPR visited six MetroPCS locations that offer SmartPay and called a dozen more, and their reps made the same 90-day pitch, though many customers don’t qualify.
Atchley didn’t have a lot of cash on hand and he wanted to get out. He was unable to return the phone for a refund to MetroPCS because, he said, he had already spoken on it for over an hour. And when he called Better Finance, their rep didn’t help either, he says.
“I mean, I even asked him, are you really careful what I say? Because the answers you give me – they just don’t make sense,” Atchley said.
Atchley and 231 other SmartPay customers have filed complaints with the Better Business Bureau and five have filed complaints with federal regulators, consistently claiming they have been misled.
MetroPCS, which is owned by T-Mobile, declined to comment on its SmartPay sales. Better Finance says the seller in Atchley’s case broke procedures and CEO Gilbert cannot control what goes on in every store.
Gilbert says that once clients sign up, “they receive an email confirming the full scope of the contract they have entered into with us and 100% disclosure through that process.”
Predatory products or more options?
“This is a new area for the children of Silicon Valley,” said Ed Mierzwinski, a consumer advocate with US PIRG, the decades-old nonprofit. “They have a lot of money, they burn a lot of money, they work really fast.”
Under federal regulations, a business must disclose the terms of a lease before – not after – it begins. In an email, Better Finance told NPR that salespeople in stores are “expressly responsible for ensuring that the customer himself reads the terms and conditions directly.”
But Mierzwinski says the sales reps working on commission will focus on promoting the product.
“When the consumer says, ‘Oh, I love your phone, but I can’t afford it,’ they say, ‘Oh, you don’t have to pay for this today. Just press that button, ”he explains.
Mierzwinski says some buttons just shouldn’t be so easy to press.