Margaret Zollner, 71, is not a good credit risk.
The senior citizen from Flushing, Queens has no job, no savings in the bank, and she recently had a car repossession on her record.
Lenders consider borrowers with credit scores below 620 to be the riskiest. According to an Equifax report this month, Margaret's credit score is 455.
"I'm on food stamps," she said, choking back tears.
But the I-Team found even someone as financially challenged as Zollner can qualify for a subprime auto loan, which has some financial analysts worried that banks are back to their old, reckless lending standards.
On a Thursday evening in September, Zollner strolled into Route 46 Chrysler Jeep Dodge in Little Ferry, New Jersey. She admitted to the sales associate she was considering bankruptcy and had recently surrendered a vehicle to be repossessed because she couldn’t afford the payment.
Despite all that, after two test drives and about two hours, the dealership found her a loan: $16,000 financing for a used 2014 Ford Fiesta. There would be a bank fee of about $4,000, and she would have an interest rate of 20.23 percent. And she would have to trade in her current vehicle, which was financed at a low interest rate.
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Zollner says those terms would virtually assure she'd never be able to pay the loan back.
"That's why there are so many bankruptcies," she said.
Frank Tackett, the co-owner of Route 46 Chrysler Jeep Dodge said it is not the dealer's responsibility to stop a car buyer from making a bad financial decision. His company does 30 to 40 subprime sales per month, making up approximately 15 percent of his sales.
"The customer has to be educated for their own finances and take responsibility," Tackett said. "They don't have to take that car loan."
Subprime car loans like the one offered to Zollner have been increasingly common in the last two years. According to a report by credit monitors at Experian, total outstanding auto debt reached an all-time high last year -- almost $840 billion. Almost one-third of all new car loans were subprime. Almost two-thirds of used car loans were subprime.
Charles Juntikka, a bankruptcy attorney who represents clients in New York City and New Jersey, calls the car loan rates "loan shark percentages."
"I mean, you see 29 percent car loans," he said.
According to another credit monitoring business, TransUnion, the percentage of subprime borrowers more than 60 days late in making payments is up, from 4.12 percent this time last year to 4.62 percent today.
Part of what is fueling the surge in subprime auto lending is a growing investor appetite for subprime bonds. Similar to the mortgage backed securities that crashed the economy in 2007, subprime auto bonds are in high demand, because they pay higher interest rates than investment-grade bonds.
"The banks, when they try to defend these loans, say, 'Well, we've never had a situation where a lot of car loans went bad.,'" said Juntikka. "Well in 2007, you had the same people saying 'Oh well, you know there's no problem with mortgages.'"
But experts who follow the subprime sector say there are key differences between home loans and car loans that make auto bonds much safer than the mortgage bonds that collapsed seven years ago.
Unlike homes, cars and trucks are relatively easy for banks to repossess if borrowers stop paying. Also, the total value of auto loans -- about $840 billion -- is a small fraction of the $10 trillion in outstanding mortgages at the peak of financial crisis.
"All I do is analyze the value of securities and I can tell you that these securities, right now, are extremely solid," said Sylvain Raynes, owner of R&R Consulting a firm that helps investors evaluate risk associated with subprime bonds.
Still, federal investigators have launched a probe into the lending standards underlying auto loans. Last month, the U.S. Department of Justice subpoenaed records associated subprime auto businesses run by Santander Consumer USA.
Margaret Zollner's 20.23 percent interest rate loan offer came from Santander. Juntikka called that a "loan-shark percentage" that should be scrutinized by prosecutors.
"At this point in time I don't see any end to it, unless the attorney general and the federal prosecutors do their job the way it wasn't done last time with the mortgage crisis," said Juntikka.
A representative from Santander sent the I-Team a written statement saying the bank has "strict underwriting policies, including income verification. The statement also suggested Zollner's ability to pay is being underestimated in part because the loan offer was conditionally based upon her trading in her current vehicle and making a down payment.
"Your stated credit score for Ms. Zollner is inaccurate. In fact, Ms. Zollner's credit score at the time she made the application was 510," the statement reads. Even a 510 credit score is considered deep subprime.
The Department of Justice does not discuss ongoing investigations, but prosecutors may be interested in finding out how Santander and other auto lenders verify the information on subprime loan applications.
While shopping for Margaret's loan offer, the I-Team hidden camera caught one auto dealer encouraging her to lie about her $800 rental payment in order to help her qualify for more financing.
"Don't put down $800 rent. Just put down $400. That's how we can help you," said the dealer.
False information on a loan application is what got Margaret Zollner in credit trouble to begin with.
In March of last year, she says she intended to help a friend by being her loan co-signer at Major Chevrolet in Queens. Dealership staff typed up an application indicating Zollner's salary is $60,000. That is more than double what Zollner's actual income is. The application also lists her as a homeowner with zero rent. Neither is true.
Since the application was submitted, Major Chevrolet has been sold and renamed Major World Chevrolet. The former owners did not return the I-Team's request for comment. The buyer, Adam Cohen, who was general manager of the former entity, referred questions to his attorney Eric Keltz.
In a statement to the I-Team, Keltz said the new dealership has offered to help pay off Zollner's debt even though he believes Zollner deceived sales staff at the former dealership.
"There is no objective evidence presented that any of the former Major Chevrolet, Inc. employees were involved in Ms. Zollner's misrepresentations to the dealership," Keltz wrote.
Zollner denies ever lying about her income or assets. The car has since been repossessed, ruining her credit.
"It's embarrassing," she said with tears welling up in her eyes.
