This is just a big bowl of wrong.

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I’m Renting a Dog?

Bloomberg

 “You mean to tell me I’m renting a dog?” And they were like, ‘Yeah.’ …

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After her family’s shiba inu died of cancer, Dawn Sabins decided to surprise her 7-year-old son with a new puppy. In March 2015, she dropped into a San Diego-area pet store looking for an English bulldog. She walked out with a golden retriever.

That wasn’t so strange, even if $2,400 was more than she’d intended to spend. (There’s a reason pet stores put puppies in the window.) The odd part came a few weeks later, when she and her husband were going over their credit reports and saw a $5,800 charge from a company they’d never heard of.

The Sabins had bought their new dog, Tucker, with financing offered at the pet store through a company called Wags Lending, which assigned the contract to an Oceanside, California-based firm that collects on consumer debt. But when Dawn tracked down a customer service rep at that firm, Monterey Financial Services Inc., she learned she didn’t own the dog after all.

“I asked them: ‘How in the heck can I owe $5,800 when I bought the dog for $2,400?’ They told me, ‘You’re not financing the dog, you’re leasing.’ ‘You mean to tell me I’m renting a dog?’ And they were like, ‘Yeah.’ ”

Without quite realizing it, the Sabins had agreed to make 34 monthly lease payments of $165.06, after which they had the right to buy the dog for about two months’ rent. Miss a payment, and the lender could take back the dog. If Tucker ran away or chased the proverbial fire truck all the way to doggy heaven, the Sabins would be on the hook for an early repayment charge. If they saw the lease through to the end, they would have paid the equivalent of more than 70 percent in annualized interest—nearly twice what most credit card lenders charge…

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Backstory:  In 2012…Dusty Wunderlich noticed something: Spending on restaurant meals had plunged during the recession, according to Census data, but spending on pet food had ticked up.

Thus was born the idea to finance purebred dogs…

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Dusty Wunderlich dreamed up Wags Lending* in 2013, then used the pet-leasing business to launch an improbable collection of financing vehicles—writing leases against furniture, wedding dresses, hearing aids, and custom auto rims. In a little more than three years, his company has originated 66,000 leases for just over $100 million.

*Bristlecone Holdings LLC, the Reno, Nevada-based company that operates Wags Lending

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“We like niches where we’re dealing with emotional borrowers.”

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Fast, technology-driven underwriting has become table stakes for online lenders in the age of cloud computing, with a range of companies promising to make credit decisions more quickly than traditional banks. Bristlecone’s main innovation is to apply that kind of underwriting to leases. Unlike credit cards and installment loans, which are subject to usury laws in many states, closed-end leases face no caps on how much a financing company can charge. That lets Bristlecone charge effective interest rates ranging from about 36 percent to 170 percent on an annualized basis, based on sample rates published on its website.

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Bristlecone’s dog leases…may just offer a new way for subprime borrowers to buy things they can’t afford.

“We’re all for going to the shelter and adopting a dog.  But if a person wants a Chiweenie, they’re not going to go to a shelter and find a Chiweenie.”

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