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Subprime dogs: How dog leasing scams can ruin your credit

Est. 6 min read

You want a puppy. You tell everyone that it’s your son who wants it – and it’s true, Little Timmy does want one – but, really, it’s you who can’t wait to bring that dog home.

So you research your options, and you know you should adopt a rescue dog, but you have your heart set on a purebred Chiweenie. You go to the pet store. You find the perfect pup. The price tag is…a little higher than you expected. But it’s the dog you, er, Little Timmy has always wanted. And the pet store has a financing plan, so you can pay off the purchase over time!

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But then you see a charge that you don’t expect on your account. A very high charge. And you find out that you’re the subject of a Bloomberg piece investigating dog leases. Turns out, you don’t own that dog—you’re just leasing it. And if you miss a payment, he could be repossessed.

I know: “repossessed dogs” sounds like the plot of a scrapped Pixar movie. But it’s a real phenomenon spreading through pet stores nationwide, made possible mostly by Dusty Wunderlich, CEO of a financial services firm called Wags Lending. And (potentially) worse than the threat of pet repo, the leases are ruining credit and wreaking financial havoc for would-be dog owners who fall for the scam.

What is the dog leasing scam?

Financing plans are nothing new. Something you need (or want) is expensive, and you pay it off, with interest, over time. It’s the basic premise of a loan. But companies like Wags Lending aren’t providing loans – they’re providing leases.

Wags Lending is one part of Wunderlich’s broader company, Bristlecone Holdings LLC, that is “writing leases against furniture, wedding dresses, hearing aids, and custom auto rims.” Wunderlich sees a world where ownership basically goes away and most things are leased. He’s just getting a headstart on it.

Under the Wags Lending model of pet purchasing, you’re leasing your dog just like you would a car. At the end of the term the dog can be bought outright, but until then you’re on the hook for every payment, and if you miss one, the company can take the dog back. If the dog dies or runs away, you’re responsible for an early repayment charge.

Those are concerns for a later date, though, right? When you’re at the pet store, you’re just concerned with being able to to take home a Chiweenie today. You can’t really afford it, but maybe down the line…

If this sounds a lot like the subprime mortgage crisis – where people were given mortgages they clearly could not afford – you’re not exactly off base. If you need a primer, here’s Margot Robbie explaining it succinctly in The Big Short:

Now people are repeating the same mistakes with their pets. They’re buying more dog than they can afford, and companies are taking advantage of this by charging absurd rates and hoping to cash in on the interest. It’s like we haven’t learned from our economy-devastating mistakes. In fact, subprime mortgages may be making a comeback. Are dog leases the canary (or Chiweenie, if you will) in the coal mine for the next financial crisis?

The main hook of this scam is that people don’t realize they’re signing up for a lease when they’re offered a “financing option” at the pet store. They think it’s a simple loan. But Wags Lending turns around and sells the lease as a security to another company, just like mortgage lenders did leading up to the Great Recession. The next thing the Chiweenie owner knows, they’re getting a bill from a company they’ve never heard of.

And what’s the big deal whether or not the financing is through a loan or a lease? Loans are subject to usury laws, which set the amount of interest that can be charged. Leases don’t have those same restrictions. There’s no cap on the interest you can be charged. Wags Lending leases, for instance, have annualized effective interest rates that range from 36% to 170%. To put that into perspective, the average credit card has an APR of around 15%.

That’s how you end up paying $5,800 for a $2,400 dog.

What are the implications of a dog lease?

Okay, so someone falls for the old “rent-a-dog” scheme. So what? It’s not that big a deal, is it?

Well, it kinda is, because it can have long-lasting effects on other financial goals.

Let’s say someone drops a lot of money on a Chiweenie, not realizing they’ve been duped with a lease. But there’s a bigger problem: As much as Little Timmy loves the dog, it’s not a good fit – for the budget or the couch cushions he keeps tearing up. The owner sells the dog, recoups at least a little of the cost, and that’s that.

Until the ex-owner looks into a big financial move, like qualifying for a loan or refinancing a home. Then it comes out that letting the lease drop is doing as much damage to credit reports as the dog did to the couch cushions.

Bad credit prevents people from getting favorable rates on other big purchases. Even if an item on a report is disputed and fixed, it can be a hassle. Paying off the debt is a safe way to repair a damaged credit score, but then the lessee is back to their original problem: paying way too much for a dog.

And if the owner does keep the dog? The out-of-control interest leaves them paying multiple times more than they would have otherwise. Their credit might be in good shape, but their budget likely isn’t. They may have to delay other financial plans as they divert more money toward paying off the lease.

All of this is compounded by the fact that, again, many people don’t even realize they’re in this situation because they don’t know they signed up for a lease rather than a loan. The difference in what they could be paying, and the protections they’ll receive, is huge.

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Alternatives to a dog lease

Still want a dog but don’t want to fall for a dog lease? Don’t worry, there are still ways to be fiscally responsible when it comes to your furry friends.

  • Buy a rescue. Purebred dogs are expensive, and that’s where you can fall victim to a dog lease. If you can find it in your heart, get a rescue dog from a shelter instead. You’ll still pay, but the costs are a lot lower. Even if they do add up, it’s in service of making sure your new dog is happy and healthy. You’re doing a good deed and getting a dog out of the deal!
  • Budget for your dog. No matter how you get your dog, there’s one surefire way to make sure you don’t get stuck with a lease: have the money to cover the cost in the first place. This is where the subprime mortgage analogy doesn’t quite work. It’s hard for people to afford a house out of pocket, but with some planning and good money management, paying for a dog in full can be easy. Budget for your pet just like you would any other big purchase, and don’t buy one that would put you underwater just because your neighbor got a Pookimo with a mohawk.
  • Get pet insurance. Dogs are expensive initially. They can be even more expensive over their lives, especially if there are medical issues you can’t even take into account yet. Pet insurance means that expensive vet bills won’t ruin your finances as much as a lease would – $50,000 for a dog’s kidney transplant is hard for most people to cover. You’ll never have to make the choice between a life-saving procedure and putting down your dog.

Taking a care of a dog, from the walking to the potty training to the cleaning up after failed potty training, is a lot of work, but most people don’t consider the work that needs to happen before you even bring the dog home. Make sure your finances are in order so you aren’t tempted by a dog lease, and you’ll have money left over to spoil your furry friend for years to come.

Published on March 16, 2017

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Colin Lalley writes for PolicyGenius, a digital insurance brokerage trying to make sense of insurance for consumers. He previously wrote for Lulu Press.
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