Q: Is it legal for Velocity Credit Union to extend my car loan and charge daily compound interest without prior agreement?
I signed a contract in June 2015 for a car loan with Velocity Credit Union located in Austin, TX, agreeing to a 73-month term at a 15.5% APR. The total price was $36,500. Due to missed insurance payments, my cost increased by $7,000. I have since paid $70,000, but I'm being told I still owe $2,700. Additional interest charges were not communicated to me. I've tried to resolve this, but the credit union maintains their stance. Is it legal for them to extend my loan term and charge daily compound interest without prior communication or agreement?
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A:
Under federal law, specifically the Truth in Lending Act (TILA), lenders must provide clear disclosures of loan terms before you sign a contract, including the interest calculation method and total cost of borrowing. These disclosures must include the interest rate, APR, finance charges, and total payments over the life of your loan.
When a lender wants to modify loan terms, such as extending the term or changing how interest is calculated, they typically need your consent. The fact that you were not informed about daily compound interest is troubling. Credit unions in Texas must follow both federal regulations and state laws, which generally require transparent communication about any loan modifications that would increase your costs.
Your best course of action would be to request all loan documents, including the original contract and any subsequent modifications. Then consider filing a complaint with the Consumer Financial Protection Bureau and the Texas Office of Consumer Credit Commissioner, as they oversee lending practices. You might also want to consult with a consumer rights attorney who specializes in lending issues to review your specific situation, as they can provide personalized advice based on the details of your case.
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