This sounds simular to the "Payday" or "Check Advance" type loans. Take in to consideration what many of them count on, customer dependency. Joe borrows $100, pays back $120 on Fri when he gets his check, then Monday on way home realizes he doesn't have enough to make it till friday, needs fuel etc. so he goes borrow the same $100. The cycle continues.
Let's say you run a C or D unit and get 10 mpg, fuel runs $2.50/g, and you only run 2000 miles per week, figure the cost. You would need $500 for fuel, and pay $25 for "admin fees", now roll this each week for 50 weeks (two off for vacation and to make the calculations easier.) You will have paid $1250 in admin fees, but you only "borrowed" $500, because you kept paying the original back each week, and got the same $500 back. Thus you would of paid in fees 2.5 times the amount you "borrowed" making the APR 250% (using the simplified method).
That being said, the next question is why would they start this practice, CD is not imposing these fees, so the're not simply passing it on to the one incurring the charges, such as paying the $2 for cash advance at the truck stop or ATM. They are not paying intrest on your monies earned that they hold for 2-3 wks, so why charge intrest for obtaining a percentage up front, other than losing a very small amount by not getting intrest on your full check as it sits in their bank for two weeks. Is to pay the person in the office for loading the CD card, if so I want that job at that rate.
If it is to curb the abuse of a few then deal with those individuals directly by limiting the amount they can get, or maybe even by lowering the amount of advance to 35% or 40% across the board. An O/O should be able to eventually ween him or her self off of using CD and just use their ATM card. But how does the fleet owner handle this if they are paying the fuel, require his drivers to maintain hundreds or more in their personal account to cover the fuel cost then reimburse on their settlement? Give the drivers an ATM card to access his account? Give them hundreds of dollars in cash to pay for fuel?
It just sounds like to me the person who came up with this either didn't think it through very well, taking into consideration all situations and the ramifications, or the company is desperate for money. I personally would question the need and/or justification for a company to impose such high fees. Just my opinion.
Let's say you run a C or D unit and get 10 mpg, fuel runs $2.50/g, and you only run 2000 miles per week, figure the cost. You would need $500 for fuel, and pay $25 for "admin fees", now roll this each week for 50 weeks (two off for vacation and to make the calculations easier.) You will have paid $1250 in admin fees, but you only "borrowed" $500, because you kept paying the original back each week, and got the same $500 back. Thus you would of paid in fees 2.5 times the amount you "borrowed" making the APR 250% (using the simplified method).
That being said, the next question is why would they start this practice, CD is not imposing these fees, so the're not simply passing it on to the one incurring the charges, such as paying the $2 for cash advance at the truck stop or ATM. They are not paying intrest on your monies earned that they hold for 2-3 wks, so why charge intrest for obtaining a percentage up front, other than losing a very small amount by not getting intrest on your full check as it sits in their bank for two weeks. Is to pay the person in the office for loading the CD card, if so I want that job at that rate.
If it is to curb the abuse of a few then deal with those individuals directly by limiting the amount they can get, or maybe even by lowering the amount of advance to 35% or 40% across the board. An O/O should be able to eventually ween him or her self off of using CD and just use their ATM card. But how does the fleet owner handle this if they are paying the fuel, require his drivers to maintain hundreds or more in their personal account to cover the fuel cost then reimburse on their settlement? Give the drivers an ATM card to access his account? Give them hundreds of dollars in cash to pay for fuel?
It just sounds like to me the person who came up with this either didn't think it through very well, taking into consideration all situations and the ramifications, or the company is desperate for money. I personally would question the need and/or justification for a company to impose such high fees. Just my opinion.
