Subprime Pet Rental Company Files For Bankruptcy

Tyler Durden's picture

Two months ago, Bloomberg's Patrick Clark penned an article that promptly went viral as it touched on a rather unorthodox topic: a pet leasing, or rather rental, company aimed at subprime borrowers who could not afford to buy their pet outright.

The company in question is Wags Lending, a/k/a Bristlecone, was founded by Dusty Wunderlich in 2003. A brief background from the original BBG piece:

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. He once worked out a plan to lease cattle to dairy farmers, though plummeting commodity prices soured the economics. (He got far enough to decide that if a cow gave birth during the terms of the lease, the lessee got to keep the calf.) In another idea that never reached the market, he explored lease financing for funerals. “We like niches where we’re dealing with emotional borrowers,” Wunderlich said.

But mostly pest: "Because dogs can be expensive, and not everyone who wants a fancy one can afford to pay cash or use a credit card. Because others, like Sabins, are more eager to bring home their new furry friend than to read the fine print of their contract. But mostly because—thanks to a 36-year-old Nevadan who ditched a career in private equity to help subprime borrowers finance purebred pets—they can."

Dusty Wunderlich

The 36-year-old in question had one simple idea: in the future nobody will own anything, everything will be leased:

“When I take a good hard look at what the world will be like in 10 years, I think most things are going to be on lease,” said Dusty Wunderlich, chief executive officer of Bristlecone Holdings LLC, the Reno, Nevada-based company that operates Wags Lending.

To be sure, Wunderlich certainly practiced what he preached:

Wunderlich rents his apartment. He leases his car. He owns his horse. He’s drawn to the rugged individualism expressed in the novels of Ayn Rand and the blog Cowboy Ethics, but he hastens to argue that while he profits off high-cost lending, he’s also improving the lives of subprime borrowers. He is, he writes in a mission statement on his personal website, “living in a Postmodern culture while maintaining my old American West roots and Christian values.”

Taking his idea further, he decided to target one particular niche of subprime clients: pet buyers who have a less than pristine credit rating. Which is why the article quickly became known as the "subprime pet leasing" piece.

On the surface, Wunderlich had a great, and lucrative, idea even if the loss provisions were sure to be quite high. There was just one problem, as the company's financially troubled clients soon found out: what was a $2,400 dog purchase would end up costing $5,800 when accounting for total interest outlays. There was another problem: the clients would quickly realize that hidden in the small print was the interest: a whopping 70% APR, double more than double the average credit card.

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.

It wasn't just the Sabins:

“There is just no way I should pay over $5000 for a $2000 puppy,” wrote one customer in an April 2014 complaint collected by the Federal Trade Commission after financing a Yorkshire terrier from a Kennesaw, Georgia, pet store with a lease from Wags Lending. (That complaint and the others that follow were directed at Monterey Financial by customers who had financed high-end pets through Wags Lending.) “The rep … told me the payments I had been making are rental [fees],” wrote another surprised lessee. “For a dog?? They are renting animals?? No way! Yes it's true!”

Which goes back to square one: "The complaints raise a valid question: Why would anyone walk into a pet store to buy an animal and decide, instead, to lease?" Well, because some people can be fooled all the time. There was another reason:

Wunderlich considered various credit models before he landed on the closed-end lease, which gave him free rein from usury laws in all 50 states. It seemed well-suited to an era when the housing crisis was threatening to sour Americans permanently on mortgages, credit card loans, even the concept of ownership.

Despite the growing customer complaints, the idea seemed so good, the money flowed in.

In 2014, [Wunderlich] landed a meeting with SenaHill Partners LP, a New York-based merchant bank firm that invests in financial technology startups. It didn’t take long for Justin Brownhill, a partner at SenaHill, to sense an opportunity in the company’s data-driven lending model and point-of-sale marketing strategy. Five minutes into the meeting, Brownhill excused himself. “I walked out and grabbed my three other partners and said, ‘I think we have something special here,’ ” Brownhill said.

 

Wunderlich parlayed that meeting into a seed round of $1.1 million. SenaHill also connected him with a firm that furnished Bristlecone with a $75 million line of credit, lowering Bristlecone's borrowing costs.

For a while everything was going great. As Clark concluded his March 2017 piece, "For now, Wunderlich is still focused on launching new credit products. He recently finalized a deal with a Utah-based bank that helps online lenders use the state's lender-friendly laws to make loans elsewhere. That will let Bristlecone expand its product offerings to include term loans, allowing it to extend more enticing rates to borrowers with better credit profiles and to finance services like veterinary care, elective surgery, even funerals—not just tangible assets like dairy cows and Labradoodles."

“We’ve gone a long way to making sure that what we’re doing is within the confines of the law,” Wunderlich said. “Is there a regulator one day that’s going to just absolutely not like what we do and pick a fight with us? Probably. And we’ll have to hash it out.”

Which brings us to today, when just 7 weeks after these words were put to html, something went terminally wrong, and it didn't even involve a regulator cracking down on the predatory pet renter. It was a good old fashioned bankrutpcy, because overnight, Wags - the up and coming subprime pet renter - admitted that its business model was terminally flawed when it filed for Chapter 11 bankruptcy protection.

And yet, even in bankruptcy, the company remained shady because unlike other corporations which file Chapter due to an excessive debt burden, listed a modest $50,000-100,000 in liabilities owed to less than 50 creditors...

... even as it disclosed assets up to 5 times as high. Why not just sell assets to cover liabilities and continue operating instead of impairing vendors such as Affordable Pups, All Pets Club, American Dog Club, Bark Avenue Puppies and so on?

Perhaps we will get some answers when the affidavit in support of the bankruptcy is filed, but somehow we doubt it.

In any case, keep an eye on the subprime entrepreneur Dusty Wunderlich: we are confident that after the "subprime pet rental" venture implosion, he will reappear soon with some new idea, one whose APR this time may be in the triple digits.

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Giant Meteor's picture

Wags the dog ..

“There is just no way I should pay over $5000 for a $2000 puppy,” wrote one customer in an April 2014 complaint collected by the Federal Trade Commission after financing a Yorkshire terrier from a Kennesaw, Georgia, pet store with a lease from Wags Lending. (That complaint and the others that follow were directed at Monterey Financial by customers who had financed high-end pets through Wags Lending.) “The rep … told me the payments I had been making are rental [fees],” wrote another surprised lessee. “For a dog?? They are renting animals?? No way! Yes it's true!”

Abandon all hope. Idiocracy Rules ...

 

ufos8mycow's picture

Dusty Wunderlick...AAAHHHAAAAAAHAAAA

El Vaquero's picture

Holy shit!  Leasing fucking pets?  Fuck NO!  My dogs are part of the family.  

ghengis86's picture

Yeah, what the fuck? Our kids grew up with the dogs since they were puppies, side by side. Pulled their tails, poked them in the nose, pulled their ears; the dogs would let them do just about anything. When they got older, they'd ride bikes with the dogs on a leash and get them to pull them like a bobsled on wheels. Had a couple litters of puppies. Learned the agony of selling them to new families. Got lazier as they got older and liked to lay on you more and more. Then, the inevitable, saying goodbye. I don't care how tough you are, put your family dog down that's grown up with your kids and you'll be water works too. Oh, and fuck a bunch of $1,000-dollar assholes. Rescue from the humane society for $50.

ThaBigPerm's picture

Subprime ... pet ... rental.  OK, that's it. I'm out.  Fuck all the things...

Giant Meteor's picture

You probably don't want to hear anything about the Dog credit derivatives and Pet default swaps then ;)

ThaBigPerm's picture

I can only imagine geting drunk and pissed off at my dog and shouting "YOU'RE RENTED!" ...

ACP's picture

Hey what about subprime wife rental?

ThaBigPerm's picture

Now that depends ... whose wife am I renting?

ACP's picture

Well it's subprime, so...

True Blue's picture

This fellow Upgrayedd (two d's for a double dose of pimpin') has some options for long term 'arrangements.'

There is something very wrong with the world when I actually have to look to see if this is for real or from the Onion.

Even scarier is that there are people out there dumb enough to sign up for this. Scarier than that: I bet half of CONgress would be dumb enough too (lookin' at you Maxine.)

Déjà view's picture

70%...Doggonit!

Dog treats that come with reserve currency status...

Retired Guy's picture

Not paying attention in math class comes at a high price.

Citxmech's picture

Thank you.  There is no reason not to rescue.  

The only exception I can think of would be if you need a real working dog for some reason.

ghengis86's picture

Agreed, but I'm torn on this. There are responsible breeders out there, practicing excellent husbandry to the animals, vet buyers, treat dogs better than some people. Not their fault that idiots buy dogs and abandon them. Or don't fix them or let them roam and knock up other dogs. Sucks that there's such an abundance of unwanted animals.

Giant Meteor's picture

Yes it does suck. New addition, Max came from the Humane Society, neutered, chipped, excellent health, starter preventatives, food, discounts on vet visits and extremely responsible "vetting" by the society folks ..

The point about working dogs above is excellent and well made. There are exceptions with breeders, responsible people, who as you say, practice husbandry, have standards and norms of care, so no issue with that ..

Abuse and neglect , zero tolerance ..

 

 

ghengis86's picture

Also the ones that get a perfectly good dog and after a few months get rid of it for no reason than they didn't feel like taking care of it anymore. Like it was a living toy and the newness-shine wore off. I have a family member that's literally gone through 9 or 10 little white fluffy dogs in a span of a few years, all ending up being given away bc it was too much. Then right back getting another one. It's not s fucking toy!!

Upon further reflection, this would be a perfect application of the Wags model, if they could shorten their terms to a few months. Shitheads with too much money and scumbags willing to dupe them into parting with it and made for each other.

Blankenstein's picture

He/She would be the perfect type to foster dogs for a rescue group or shelter.  They want people who will temporarily care for the animals in their own homes.   And as opposed to contributing to the unwanted pet problem, they would actually be contributing in a very positive way.  

general ambivalent's picture

You can also find high drive dogs and working dogs that were given up because the owners simply couldn't handle them. Unlikely to be suitable for protection work, but if you're a good trainer you could probable undo most of the mistakes for other types of work.

The saddest thing I find is the people who give up their dogs just because they're moving.

Miffed Microbiologist's picture

Working dogs are bred to work. They go crazy if there is no project for them to do and they can be quite destructive. Every evening I ask my Shepard and Corgi to bring in the chickens to be shut in for the night. One works the upper acre and the other, the lower two. Yes, a bit of squawking and an occasional loss of a few tail feathers but the job is done and I have 2 dogs who are happy and easy to manage.

It's just idiotic if anyone expects a working dog to morph into a lap dog. This is an impulse purchase with no research into the breed. And the dog is the one to suffer because of a stupid owner.

Miffed

Joe Sichs Pach's picture

Did he get the idea from BladeRunner?

Citxmech's picture

Probably.

PS  WTF is a "High-end pet?"

SoDamnMad's picture

(we would like to lease your wife.)   It is half time at the super Bowl and you are out of beer. Sign this paper and we will deliver 2 cases of cold beer of your choice and a large hot pizza. Thank you. Here is your copy and we will take our copies. What beer do you prefer and what do you want on your pizza?  Snidely Whiplash would be proud of us.

Grumbleduke's picture

what a cruel and sadistic business model. How about a kid rental - give 'em back when no longer needed?

What kind of an asshole would do that? 

skinwalker's picture

There's no way I should pay $300k for a $175k house...

But everyone does.

Giant Meteor's picture

Well not everybody. I live a simple life, of modest means. I'm ok with that.

Now I realize many do, I know some of them. Upside down ..

I had always associated that term with automobiles,

I do however take your point, especially in light of the fact that many of these plastic, fiber board crap shacks aren't worth the $175K, let alone 300 K ..

I prefer an old barn on good land, the more remote, the better ..

BorisTheBlade's picture

If only he had leased his pets to the government.

divingengineer's picture

I'm wondering how the hell you go bankrupt at 70% APR? Exactly how much interest would this guy have to charge to stay in business?

armageddon addahere's picture

It doesn't matter what the APR is if your customers don't pay. We found that out in 2008.

Handful of Dust's picture

What do you mean, "Douche"? he probably paid himself a $550,000 salary and $200,000 bonus before he filed for bankruptcy.

Citxmech's picture

That guy needs to be punched in the dick.

Or better yet - lock him in a pillary and charge a dollar for a chance to kick him in the balls.  You could donate all the money to the local animal shelter.  

Hell, I'd wait in line all night. . . 

Socratic Dog's picture

Whaddya mean, douche?  The mans a cowboy ethicist!  He said so himself!

The long-lost n ashkenazi cowboy tribe?

Citxmech's picture

Most of the cowboys I know would consider it their "ethical duty" to beat the living shit out of this asshole.

meditate_vigorously's picture

Wow. I would never had guessed that a Jew would launch a business based on usury.

Rent Seeking should be illegal in a stable society.

Archibald Buttle's picture

i have heard radio comercials for fucking tire rentals. i thought that was pretty much peak insanity. leasing pets? i was wrong. people being tricked in a brand new way to lose money are obviously a dime a dozen. i will even bet some sucker is holding this type of collaterallized shit in their pension/401k.

me? im going to start wearing the kind of shoes that need shining. them shoeshine boys got all the hot stock tips after all.

 

OldTrooper's picture

Ahem, let me understand this...

You are paying $2000+ for a fucking dog?  And it's a good idea to finance this?

How many kinds of stupid are you?

max2205's picture

USA.  Land of the stupid 

TheLastTrump's picture

hahahahahaha

 

 

hahahahahahahaha

 

 

 

hahahahhahahahahahah

izzee's picture

Pets.com been there done that.
Wait YOU Fugin' tried that Again?

Yeh your erstwhile customers are the people who voted for Sanctuary Cities/Towns/Burgs. Because those immies are so so so cute and cuddley. And we can afford it.

http://www.zerohedge.com/news/2017-04-19/new-york-towns-cities-follow-ag...

runswithscissors's picture

They paved pet paradise and put up a barking lot!

Handful of Dust's picture

I have a couple of pet roaches around that I notice are very friendly. They usually wait until after dinner when all th elights are out to come out since they are very considerate and don't want to disturb others.

 

And they're free!

TheLastTrump's picture

OK, i didn't mean to laugh. I should probably take this seriously. hehehehehe

skinwalker's picture

I've seen some serious shit in my life, but damn.

Giant Meteor's picture

Wunderlich rents his apartment. He leases his car. He owns his horse. He’s drawn to the rugged individualism expressed in the novels of Ayn Rand and the blog Cowboy Ethics, but he hastens to argue that while he profits off high-cost lending, he’s also improving the lives of subprime borrowers. He is, he writes in a mission statement on his personal website, “living in a Postmodern culture while maintaining my old American West roots and Christian values.”

On the other hand, while this piece of shit, well, is a piece of shit, it's difficult to define the level of stupid of his former clientele..

 

gregga777's picture

Where exactly in the Talmud are the teachings about Christian values?  

Giant Meteor's picture

Usury is a crime ..

But what this story really points out clearly, none of this could exist without obedient and willing slaves, who apparently, do not know or care that usury is a crime.

The character described here knows nothing of Christian values or for that matter, any other values, or standards of decency. Sure some steal with guns. I have more respect for THEM than a piece of shit like this ..

Hell, I might just be able to pull the trigger on him myself, speaking of western heritage , and swift frontier justice.