TitleMax Ordered by CFPB to Pay $10MMM for Unlawful Title Loans and Violation of Consumer Rights

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There are steps you can take to protect yourself. 

This week, the Consumer Financial Protection Bureau (CFPB) took action against TitleMax for taking advantage of military families and other consumers. The CFPB found that TitleMax violated federal consumer financial law by pushing consumers to take out unlawful title loans and steering them into loan extensions that violated their rights. The company has been ordered to pay a $10 million penalty, refund affected customers up to $5 million, and end the practices in question.

TitleMax is a repeat offender

The CFPB revealed that TitleMax had been illegally taking advantage of military families by providing them with prohibited title loans at shockingly high rates, in some cases charging nearly three times over the 36% annual interest rate cap under the Military Lending Act. The CFPB also found that TitleMax tried to conceal these practices from law enforcement, going so far as to change borrowers’ personal details in order to hide the fact those affected were part of the armed forces.

In addition, it appears that TitleMax had made illicit attempts to increase loan payments via unlawful fees. TitleMax also charged thousands of customers for an insurance product that was essentially worthless. Despite claiming that the fees were necessary to protect against potential losses, these auto loans lacked any coverage whatsoever — and in some cases, weren’t even eligible for it. This isn’t the first time that TitleMax has been under an order.

The CFPB found the company was pushing 30-day loan payments and misleading customers about how much it would cost to renew their loans multiple times. TitleMax was also found engaging in high-pressure debt collection tactics. In response to earlier predatory practices, the CFPB ordered TitleMax to cease such activities immediately and pay a $9 million penalty for its violations in September 2016.

What can consumers do to avoid falling victim to a predatory company?

Shop around and compare interest rates

Before committing to any auto loan, it is important to shop around and compare different lenders’ interest rates. This is especially true if you are looking for an auto title loan, as these tend to have higher interest rates than other types of loans. Make sure that you read the fine print of any loan agreement before signing; this will help ensure that you are aware of all fees associated with the loan, as well as its terms and conditions.

Ask questions

It is always beneficial for potential borrowers to ask questions about the terms of their loan. If there are any aspects of your agreement that seem unclear or confusing, be sure to bring them up with your lender so that everything is crystal clear before signing the contract. Don’t feel pressured to sign and if you do, don’t be afraid to step away.

Military members can access free military legal assistance with their local legal office on base or post. Additionally, ask about the lender’s policies regarding late payments or repayment plans; this could save you a lot of money in the long run if something unexpected happens and you are unable to make a payment.

Know what to expect

It is also important for borrowers to know what they should expect when taking out a loan by doing their research ahead of time. Be sure to read up on industry standards for interest rates and repayment terms, so you can spot any red flags or signs of predatory lending practices before agreeing to anything. Knowing what an appropriate offer looks like will help you avoid getting taken advantage of by unscrupulous lenders like TitleMax.

Keep an eye out for predatory behavior

Finally, it is essential for borrowers to keep an eye out for predatory behavior from their lenders. A few warning signs include things like:

Hidden fees or chargesAggressive debt collection practicesOffers that seem too good to be true

If you notice any of these signs while shopping around for a loan, it might be best to steer clear and look elsewhere instead!

Taking out a loan can be intimidating, but it doesn’t have to be if you do your research beforehand and keep an eye out for predatory behavior from lenders. By comparing different options, asking tough questions, and getting a professional review of your lending agreement before signing, you’ll have all the tools necessary to protect yourself from financial scams and other forms of exploitation.

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