California Dept. of Business Oversight takes action on Auto-Title Loans

photo-art by Jonathan Farrell (2019)

Next to owning a house, a car is a vital asset for just about everyone. And, for those in the commute to work everyday that set of wheels no matter how plain is a “set of legs,” “a life line.” For some the car they own is the only collateral towards a source of cash, especially during the holiday season.

Similar to the “Pay-Day Loan” an “Auto-Title Loan” provides cash to those in need of funds in exchange for the assessed value of their vehicle. But that quick, often called a “pink slip loan” of cash can come with interest and fees far heavier than what a person bargained for.

Today, on Dec 16, The California Dept. of Business Oversight announced that it finalized a settlement with auto title lender TitleMax of California, Inc.

The details of this settlement represent an ongoing crackdown, three years in the making on illegal consumer loans.

The settlement will deliver nearly $700,000 in refunds to more than 21,000 TitleMax customers. It will also require the Georgia-headquartered lender to pay a $25,000 penalty to resolve allegations that it routinely charged excessive and illegal interest rates and fees.

Some of the complaints about TitleMax and other such lenders are posted on websites such as Consumer Affairs and TrustPilot. Yet it is The California DBO, which has had the authority and resources to bring these unscrupulous practices to light and seek justice.

“No one should take advantage of struggling consumers who are forced to take out loans on vehicles they desperately need,” said Commissioner of Business Oversight Manuel P. Alvarez.

In a statement released to the press he added. “I am pleased that TitleMax has agreed to make refunds, pay a fine, and cooperate in the settlement of this matter.”

The DBO moved in December of 2018 to revoke TitleMax’s California Financing Law license based on allegations that the lender routinely charged excessive interest rates and fees; illegally included vehicle registration, lien and handling fees in bona fide principal loan amounts; charged illegal vehicle registration handling fees; and submitted inaccurate reports to the DBO during an examination that began in 2016.

The DBO exam and subsequent investigation found that TitleMax illegally required customers to pay the lender to cover Department of Motor Vehicles (DMV) charges to file its liens, for registration and for other fees owed on borrowers’ cars.

Some borrowers as posted on web sites like TrustPilot noted that the interest and other fees far outweighed the amount of the loan. And, in one instance, a borrower posted that TitleMax moved/changed the due date of payment without notice so that the borrower had to pay late fees. This and similar situation-type of complaints is among those that got the DBO’s attention. Warnings about this type of lending is posted on many web sites like The Federal Trade Commission. 

People often sucked in by appealing ads. Or they become confused by the subtle and fine-print details as Mark Leyes explained – speaking on behalf of the DBO. “Payday loans are governed by the California Deferred Deposit Transaction Law (CDDTL). A ‘payday loan’ has a maximum of $300 and a short term or repayment, which is usually 14 to 30 days.”

“The loans involved here are larger amounts and longer term, said Leyes, usually installment loans. Specifically, Titlemax deals with loans collateralized with the borrower’s automobile. If the loan is in default, the lender can repossess the automobile.”

Once the car is taken, the borrower is worse off than before. And, that person is without “legs or a life line” so to speak for commuting to work and getting out and about.

Starting Jan. 1, state interest rate limits will be extended to consumer installment loans of $2,500 to $9,999. Interest rates on those loans will be capped at 36 percent plus the Federal Funds Rate. The TitleMax settlement follows similar actions the DBO has taken against California Check Cashing Stores, LLC; Speedy Cash; Advance America; Check Into Cash of California, Inc.; Quick Cash Funding LLC; and Fast Money Loan.

Consumers with questions about the refunds should call 888-485-3629.