It also argued that its loans aren’t more likely to result in lawsuits than loans from other subprime lenders. But unlike competitors who bundle and sell debt elsewhere, the company said, it services its own debt, and thus files lawsuits in its own name.

“To summarize, it is against our company policy to make a loan we believe will fail, to anyone we believe cannot afford the monthly payment,” Midwest said. “And our policy works well the great majority of the time.”

High interest rates

As U.S. auto sales have rebounded, investors have been pouring money into subprime loans. Many lenders have loosened credit standards and raised interest rates to account for more risk.

Several borrowers interviewed by the Post-Dispatch who ended up with rates of nearly 30 percent said they visited multiple dealerships and failed to find a willing lender. Some said they knew the interest was high but signed the papers because they couldn’t get to work without a car.

Others had little awareness of what was in the contract and didn’t understand the terms until they fell behind and saw how little of their payments had gone toward principal.