May 19, 2000
A Detroit lender is moving its operations to the Internet and giving away PCs and Internet access, hoping to grab a bigger piece of the subprime home mortgage market. Consumer advocates say is a "predator" but the company claims its goal is helping clients pursue "financial freedom" through debt consolidation.

In fact, substituting a larger home mortgage with a higher interest for credit card debt is nearly always a bad idea, say consumer advocates. Since the borrower's home is used to secure the mortgage, a consumer who falls behind in making payments can wind up losing his or her home. itself concedes that two-thirds of its clients find themselves back in a "negative credit situation" within a year of completing a refinance.

Based in the Detroit area and known until recently as World Wide Financial, Inc., LoanGiant has been giving borrowers "free" PCs and a year's free Internet access as an inducement to refinance their home and use the proceeds to pay down credit card and other unsecured debt.

The company's loans typically carry high interest rates of 13% or more, large balloon payments, multiple points and heavy penalties for paying off the loan early. About half of's clients are African-American and the Association of Community Organizations for Reform Now (ACORN) says the company's practices are "devastating" to inner-city and lower-income communities.

"Across the country, predatory lenders target families in lower-income and minority communities for high-fee, high interest rate mortgages using a wide variety of deceptive practices. These families, who often don't have access to mainstream financial services, are trapped into paying tens of thousands of extra dollars to lenders who misled them about the real costs of the loan," ACORN charged. "Some loans are intentionally structured to lead to foreclosure while others include financing for outrageously priced credit insurance or for home improvements that are done poorly." is going after the subprime market more aggressively than other lenders, using the free computers and heavy advertising to entice clients. Other subprime lenders targeted by ACORN include Associates, Household and Beneficial.

The AARP Foundation is also among the consumer groups challenging Jean Constantine-Davis, litigation attorney for the foundation, says the free computers and Internet access are nothing more than a distraction, intended to keep consumers from adding up what the loan payments will be and how much the loan will cost over time.

In a recent transaction cited by The Wall Street Journal, 32-year-old Melissa Brantley, a Detroit city worker, got a "free" computer by refinancing her two-year-old mortgage, raising it from $29,000 to $40,000 as part of a debt consolidation program. She wound up with a 13% interest rate, a balloon payment of $34,971 when the loan comes due in 2015 and closing costs that included four points and were nearly twice as high as more conventional loans.

Ms. Brantley will pay more than $79,000 over the life of the loan, while facing the $34,000 balloon payment after 15 years of payments.

"It all happens so fast," Ms. Brantley said, conceding that she probably could have found a better deal by contacting multiple lenders. claims it is helping its clients "bridge the digital divide" and denies its practices are predatory. The company is headed by Andy Jacob, a former gym owner and personal trainer. The company is planning to go nationwide with its pitch and is planning a $4.7 million ad campaign beginning in September.