TitleMax was hit with a $9 million fine for allegedly misleading customers on the cost of its auto pawn loans and using abusive debt collection tactics, a federal watchdog agency said Monday.
The Consumer Financial Protection Bureau’s actions hit one of the nation’s largest auto title lenders, with 1,300 stores in 18 states, according to the federal agency.
Savannah-based TitleMax’s ads with the slogan, “I got my title back with TitleMax,” are almost as much a TV fixture as prescription drug commercials these days.
In its complaint, the CFPB said TitleMax's employees misled customers into signing up for title pawn loans that renew each month while failing to disclose that the loans carry annual interest rates of up to 300 percent.
TMX Finance, TitleMax’s parent company, agreed to the settlement and fine without admitting or denying guilt. The order also requires the company to halt practices cited in the complaint.
TitleMax “lured consumers into more expensive loans with information that hid the true costs of the deal,” said CFPB Director Richard Cordray in a press release. “They then followed up with intrusive visits to homes and workplaces that put consumers’ personal information at risk. Today we are making it clear that these actions were unacceptable and illegal.”
In a press release, TMX Finance said it had been “transparent and cooperative” with the CFPB. The firm said the settlement addresses the agency’s concerns while allowing it to continue lending to customers.
“Many of our customers have nowhere else to turn when they suffer from short-term financial setbacks like medical emergencies or home repairs, and we are committed to remaining a reliable source of credit for them,” said TMX Finance President Otto Bielss.
But in its complaint, the CFPB said the company tried to obscure the high costs of those loans during sales pitches.
In Georgia, the CFPB said, TitleMax charges roughly 10% to 25% in finance costs per month for title pawn loans. The loans of $100 to $10,000 are based on the value of the car being used as collateral.
The agency said the company’s employees used a “Voluntary Payback Guide” and other marketing materials to encourage customers to take longer to pay back loans without making it clear that they would rack up higher interest costs and fees as a result.
When customers fell behind, company employees made so-called “field visits” to their homes and workplaces and illegally disclosed sensitive personal information to pressure them to pay up, the agency said.
By telling employers, neighbors and others that a customer was behind on a debt, the company could cause “substantial injury” to consumers, the agency said.
The CFPB said in its complaint that such acts are an “unfair, deceptive or abusive” practice that violates federal law.
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