Posted: May 8, 2012 4:32 PM
Updated: May 8, 2012 6:40 PM
MCALLEN - A McAllen woman got a $1,260 check in the mail. But Stephanie Contreras knows free cash doesn't exist.
"I didn't ask for this money... I don't want any money," she said.
Contreras read the fine print. By cashing the check, she'd also be signing a contract. The check is really a loan with extremely high interest rates.
The check came from Regional Finance Corp., which is based out of South Carolina. The company operates an office in McAllen. Workers in the McAllen office directed CHANNEL 5 NEWS to the corporate office, which mails the checks.
We're told people in the Rio Grande Valley cash the checks all the time. Mailing the checks is legal.
Dave Jackson, a finance professor at UT-Pan Am, explained loan companies sending checks in the mail are fishing. The fast easy cash is the bait.
"If somebody just hands you money, there's usually a catch," he added.
By endorsing the check, a person signed a contract, which is enforceable in court. Jackson said these types of loan contracts are misleading.
Even people who read the fine print, like Contreras, likely won't know the actual details. For example, the loan states an annual interest rate of nearly 60 percent. Jackson calculated the actual interest that people will have to pay.
"You get 78.39 percent," he told us.
That's nearly 20 percent higher than the amount shown in the fine print.
"It may be legal, but it's certainly unethical," said Jackson.
Turning down fast easy cash saved Contreras thousands of dollars. Jackson told us these loan companies will try to make the checks look more legitimate to make you feel better about cashing it. One example is a check from Wachovia Bank, a very popular bank name; however, the Wachovia most people would think about doesn't exist anymore.