Customers Shocked By Costs Tied To Pet Financing, Leasing

(CBSDFW.COM) - You've heard of financing a car, maybe even furniture, but what about a dog?

Certain pet stores in Texas are offering payment plans for high-priced pets.

However, some customers say they only realized how much they actually owed for their purebred puppies after it was too late.

Marshall was the pet Luis Ortega always wanted, but he could never afford: a purebred, French bull dog.

Then, Ortega saw posts on social media advertising puppies that could be financed with as little as zero down. The photos were from Pets R Us, which has locations in Huffman and Garland.

The business offers financing for pure breeds, including English bulldogs, French bulldogs, and Yorkshire terriers. Costs range between $3,000 and $15,000, according to the website.

When Ortega messaged the store about pricing, he said an employee told him the dogs started at $2,500.

"They said they had plenty of the $2,500 dogs, and I could go down there and get one of them," said Ortega.

When Ortega visited the Huffman location later that week, a salesperson said the dogs costing $2,500 weren't available.

After Ortega indicated he wanted Marshall, an employee set the price at $5,500.

"I was disappointed, I was sad," said Ortega. "I had drove eight hours, I felt pretty bad not being able to walk out with the dog you wanted and waited so long for."

That's when Pets R Us offered the solution of financing through one of several out-of-state companies.

Instead of paying in full, Ortega could make monthly payments using the California-based company, EasyPay Finance.

An employee approved his girlfriend online immediately, but his girlfriend only qualified for half the cost. Pets R Us allowed Ortega's ex-wife finance the other half, even though she wasn't present.

The paperwork Ortega received that day included health guarantee guidelines and documents on common illnesses. The documents did not specify how much they would be paying.

"They didn't give us any paperwork, they just gave us a number to call," said Ortega.

An email Ortega's girlfriend later received from EasyPay revealed a staggering cost: an APR of 151 percent. That meant the payments for half of Marshall's price could end up totaling more than $8,000.

Since 2017, four customers have contacted the Texas Attorney General's Office about Pets R Us, claiming they were blindsided by high rates and fees in their payment plans.

The three customers who filed complaints allege they had no idea they were entering a lease agreement.

Another customer contacted the office via telephone, stating there was a discrepancy in the price of the dog.

One customer claimed the owner told him he would end up paying $3,300 for a Yorkie without clarifying that cost did not include additional charges.

"Never did she correct me or stated [sic] the total was actually $8,999 plus an extra $500 to keep the dog because it was not a loan it was a lease," the complainant wrote.

In another complaint, a customer said the owner never explained she was signing a lease agreement and would need to pay $450 to actually own the dog at the end of the contract.

She also described difficulty seeing the terms and conditions in the store.

"When I asked her again for the terms and payments she said that I was going to get the information via email, she was not able to provide for it," the complainant wrote.

Robert Hopkins and his wife were looking to get a new dog after their beloved pet recently died.

Hopkins said that via text, a salesperson for Pets R Us stated English bulldogs and French bulldogs started at $3,500.

Soon after, the Hopkins visited the store in Garland. But Robert Hopkins said upon arriving, a salesperson claimed those $3,500 dogs were not available.

Filling out an application through My Pet Funding, Hopkins' wife was pre-approved for $3,250.

Then Robert Hopkins did the math and backed out.

"At that point, my jaw hit the floor," said Hopkins.

Hopkins shared a screen grab of the approval amount for a "closed-end lease."

My Pet Funding stated the maximum monthly payment would be $249.88 for 30 months. That amount calculates to $7,496.40.

"I was lied to, it was very deceiving, I was misled, and I don't want to do business with a company that's not upfront," Hopkins said.

Pets R Us uses three outside finance companies, according to its website: LendingUSA, My Pet Funding and EasyPay Finance.

Each promises "fast and easy" approvals that can be done online.

In most cases, all you need to apply is a cell phone, an email address, a bank account and a monthly income of at least $1,000.

For LendingUSA, loan applicants must provide financial information like your income, mortgage and rental payments, employment status and bank numbers.

My Pet Funding offers closed-end leases, proclaiming on their website, "no credit, no problem."

A calculator shows a customer's potential monthly payment and buyout options, which was how Hopkins was able to see how much he'd owe.

Over the phone, a representative with EasyPay said interest rates depend on credit history, with rates ranging between 29 and 200 percent.

Depending on the finance company, merchants like Pets R US pay between 2.99 and five percent in fees on every contract.

But beyond that amount, it's unclear how much these companies actually profit from pet purchases.

My Pet Funding and LendingUSA have not responded to our questions.

We also asked whether the terms of the contracts are clear enough.

Only a spokesperson from EasyPay responded, writing: "EasyPay has easy to read contracts and a simple application process which allows the customer to see their APR and terms in plain language up to 3 times before the customer agrees to sign."

The Ones for Justice visited the stores in Garland to see how the payment programs work.

That day, an employee said the dogs started at $6,500.

"You just apply, and then you pay monthly," an employee said. "We offer two companies that do zero down."

Employees showed an online application from the California-based company, LendingUSA.

But just like most financial agreements, you can't see your interest rate or APR without providing personal information.

"You know, if I lost my job or something or I couldn't make a payment anymore, what would happen?" asked Autler.

"I assume it would just mess up your credit," the employee replied.

Consumer attorney Daniel Blumberg weighed in on the practice after reviewing the complaints against Pets R Us filed with the Texas Attorney General's Office. He is not affiliated with any of the complainants.

"I call it bait and switch," said consumer attorney Daniel Blumberg.

Blumberg said while these agreements are legal, it's misleading to not disclose costs.

"I would call it a deceptive trade practice, I would call it unconscionable," said Blumberg.

Owner Lucinda Mares Aguilar declined to be interviewed but sent us an email responding to several questions.

"Our salespeople do not engage in misleading customers," Aguilar wrote. "Pets R Us does not track the interest charged on monthly payments, as the contract is a private agreement between the finance company and the customer."

Meanwhile, Ortega has still not paid off Marshall.

"Yeah, it's easy to manipulate someone with a puppy," Ortega said.

In Texas, certain companies must abide by usury laws, also known as caps on interest rates.

But the Attorney General's office did not provide an answer as to whether pet lending companies are exempt from this law.

Lawmakers are already talking about addressing the practice of pet leasing.

Sen. Joan Huffman (R-Houston) filed a bill that would make it illegal for a pet to be repossessed by a seller as part of a contract for the transfer or purchase of a pet.

A spokesperson from Huffman's office confirmed the legislation was inspired by Pets R Us.

Rep. Capriglione (R-Fort Worth) also filed similar legislation last month.

In 2017, California, New York, and Nevada passed laws to ban pet leasing. Lawmakers in Washington, Florida, Indiana, and Virginia are also weighing similar legislation in 2019.

Aguilar said Pets R Us has never repossessed a dog.

But it's difficult to know the actual terms and conditions of each financial contract.

None of the third-party financial companies provided sample copies of their agreements.

Requests for comment were not returned by LendingUSA or My Pet Funding.

But representatives from EasyPay Finance did respond to our questions.

Tomika Clemons, a merchant services manager, described their agreements as retail installment contracts.

Clemons said EasyPay disavows the practice of leasing, renting, or repossessing pets.

"Unlike most of EasyPay's competitors who are utilizing leasing agreements, EasyPay customers own their pet the second we receive their signed retail installment contract," Clemons wrote.

Q&A with Pets R Us owner Lucinda Aguilar:

Q: How many finance companies do you work with?

A: Finance options are made available as a service to our customers. We work with 3-4 companies, depending on the options they offer our customers.  Occasionally, when a customer applying for financing does not receive financing for the full cost of the puppy, we have, in the past, discounted the cost of the pet in order to accommodate the customer to take home the puppy of their choice.  It is not a policy of Pets R Us, but something we have done on a few occasions.

Q: How often do you use multiple finance companies for a single dog/purchase?

A: We no longer offer multiple finance companies for a single dog purchase.  In addition to financing the purchase of a dog, we offer separate finance options to customers to assist in purchasing necessary supplies for new pets.  We comply with the requirements of the individual financial companies whose services are offered. Certain companies allow Pets R Us to "roll over" the remaining cost of the pet into a loan that also includes funds for pet supplies. When allowed by the financing company, this is done only as a benefit to our customers who want to purchase a puppy when one form of financing will not cover the full cost.

Q: What is the interest charged on these monthly payments?

A: Pets R Us does not set or establish the interest rate charged by individual financing companies.  The interest charged on monthly payments are set by the finance companies and the customer's credit rating.  The customer ultimately signs all contracts which clearly detail the terms of the transactions.  Pets R Us does not track the interest charged on monthly payments, as the contract is a private agreement between the finance company and the customer.

Q: Are salespeople misleading customers about the price of these dogs?

A: Our salespeople do not engage in misleading customers. We value our customers and our puppies and we work hard to ensure repeat business.  We offer a broad range of breeds of puppies and the availability of specific puppies changes often, as they tend to sell quickly. A Bulldog can be priced at $3500, while other rare breeds can be as much as $15,000.  The price of a dog depends on the rarity of the breed.  It is possible that a customer could call about a specific puppy, but that puppy is not available when the customer comes in.  We do not place holds on specific puppies without a deposit.

Q: Do you employ high-pressure sales tactics?

A: Our goal at Pets R Us is to match puppies with loving homes. We have no interest in employing high-pressure sales tactics.   Our clients and puppies are very important to us.  We would never want anyone to purchase a dog that he or she did not actually want.  That does not benefit the customer or the dog.  We believe in building solid relationships with our clients and much of our business comes from referrals.

Q: Have you ever repossessed a dog? If so, how many?

A: Pets R Us has never repossessed a dog. Pets R Us provides finance and lease options in an effort to serve our customers and provide the best puppy-buying experience possible.  The terms of the transaction are clearly stated on all forms signed by the customer.  Once the pet is sold, the customer will deal directly with the finance company regarding payments and balances.

Q: Are these closed-end consumer leases or retail installment contracts?

A: As previously explained, any contract for financing is a private agreement between the finance company and the customer.  The customer signs all contracts which clearly detail the terms of the transactions.  A customer can always purchase a pet outright without resorting to financing.  For those that require financing to purchase their pets, Pets R Us provides various options as a courtesy to our customers.  Brochures made available to customers detail the fact that lease purchase options are available; as are cash purchases, and financing through traditional loans. In addition, documentation, including the contracts customers sign, also make clear when a customer enters into a lease agreement versus traditional financing.  What type of contract a client agrees to with a financing company is a decision he or she makes and is something that Pets R Us is not privy to. Pets R Us employees directly question the customer about their credit score. For those with higher credit scores, traditional finance options are available and provided. When a customer indicates to a Pets R Us employee that they have a lower credit score, the employee presents the customer with the option to use a lease purchase program like "My Pet Funding." Pets R Us currently uses "My Pet Funding" for all lease purchase financing. If the customer chooses to proceed with the transaction, the customer then signs detailed agreements both electronically and in print form that clearly indicate the customer is signing a Lease Agreement. Customers selecting a lease purchase option sign and date contracts directly acknowledging receipt of a copy of the Lease Agreement. The terms of the transaction are clearly stated on all forms signed by the customer.

Q: Do you allow multiple people to get preapproved to finance the same dog, even if they are not the owner of the dog?

A: If permitted by the finance company, multiple people can be pre-approved for financing to get the pet of their choice. Under the terms of the agreement, the person signing the contract for financing is considered the owner of the pet.

Q: Do you own the dogs at end of agreement?

A: That would be governed by the terms of the customer's individual contracts with the financing companies.  We are not a party to those agreements.