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"Just Snowballs" :
While finance charges are relatively high in Georgia, it is the insurance policies that can drive the cost of borrowing into the triple digits. Almost everyone who takes out a small loan also buys insurance. Most people end up with three or four policies.They say it's voluntary, but they don't ask people," said John B. "Jack" Long, an Augusta lawyer. "They say, 'Sign here.' " Small-loan companies like the insurance products for two reasons. The insurance guarantees that they will get paid if something happens to the borrower. The policies also pump up the bottom line. Insurance policies drove up the cost of borrowing for the Hobbys. They are typical small-loan customers - people with a steady income, poor credit and no financial cushion. A few years ago, the couple, who are raising their 10-year-old grandson, fell on hard times. Injuries resulting from a car accident left J.C. Hobby unable to work as a tow-truck driver. The Shell station where Georgia Hobby, 54, works as a cashier cut back on her hours
The bills quickly mounted. "It only takes a few weeks to get behind when you are stretched pretty thin. Then it all just snowballs on you," said J.C. Hobby, a burly man who worked as many as 80 hours a week towing cars, earning more than $40,000 a year. Hobby now needs a cane to get around and faces a host of new health problems, including diabetes. After the Hobbys lost their house and declared bankruptcy, they could not get a bank loan when cash ran short again. So they offered their 1989 Ford Mustang as collateral to McIntosh Finance, along with their color television and VCR. One of the insurance policies that came with their loan was to pay it off if the Mustang was totaled. Another was to pay it off if one of them died. They also bought a policy that would pay the Hobbys if one of them lost a limb or died, not of natural causes but in an accident. Another policy would kick in if one of them got sick and couldn't work for as few as three days - a type of disability coverage no other state except South Carolina allows. The coverage is relatively expensive and viewed as unfavorable for consumers. The policy added $58 to the Hobbys' loan
On top of it all, the Hobbys' contract included the $72 car club membership. Borrowers are often unfamiliar with the terms of their loan contracts. "Most of the people who come in here didn't understand what they signed," said Judge James Stripling, Coweta County's chief magistrate, who rules on small-claims cases, including those involving small-loan companies. "If they did understand, they desperately needed the $500 and they didn't care that it cost them just as much to get that short-term loan." McIntosh has taken the Hobbys to court to try to force them to pay. With late charges and court costs, McIntosh says it is still owed $455, court records show. Sitting in the cramped, run-down trailer they rent by the week in Sharpsburg, about 40 miles south of downtown Atlanta, J.C. Hobby tried to focus on the good things in his life - a wife he feels lucky to have landed 25 years ago and a grandson who needs him day in and day out. But it is hard to stay upbeat with the debt from McIntosh still looming. "I hate being injured," he said. "I hate being sick." Today, the family's financial survival rides with Georgia Hobby, a short Midwesterner as reserved as her husband is chatty. She still works at the Shell. And she's taken another job waiting tables at a nearby Waffle House. "We can't barely get by as it is," her husband said, "and they are still dogging us."
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