WASHINGTON–The Consumer Financial Protection Bureau (CFPB) has taken action against a web of corporate entities operating under TMX Finance, broadly known as TitleMax, for violating the financial rights of military families and other consumers in providing auto title loans.
The CFPB reported it found TitleMax violated the Military Lending Act by extending prohibited title loans to military families and, oftentimes, by charging nearly three times over the 36% annual interest rate cap.
“TitleMax tried to hide their unlawful activities by, among other things, altering the personal information of military borrowers to circumvent their protected status,” the Bureau said.
The CFPB added it also found TitleMax increased loan payments for borrowers by charging unlawful fees. The CFPB said its order ends TitleMax’s illegal activities, and requires the company to pay more than $5 million in consumer relief and a $10 million civil money penalty.
Composition of Company
According to the CFPB, TitleMax is made up of TMX Finance LLC and numerous subsidiaries across the United States with both in-person and online locations. Savannah, Ga.-based TitleMax is engaged in the business of extending short-term, high-cost consumer loans that are secured by borrowers’ vehicle titles up to $10,000.
TitleMax is privately owned, and currently has more than 1,000 locations in 18 states: Alabama, Arizona, Delaware, Florida, Georgia, Idaho, Illinois, Kansas, Mississippi, Missouri, Nevada, New Mexico, South Carolina, Tennessee, Texas, Utah, Virginia, and Wisconsin, the CFPB said.
“TitleMax is a repeat offender,” the Bureau said. “TitleMax has been under a CFPB Order since September 26, 2016, for its lending and debt-collection practices,” the Bureau stated. “In the 2016 Order, the CFPB found that store employees, as part of their sales pitch for the company’s 30-day loans, offered consumers a ‘monthly option’ for making loan payments and misrepresented the true cost of its loans if the consumers renewed them multiple times. The CFPB also found that the company engaged in illegal high pressure debt collection practices.”
Multi-Million-Dollar Penalty
The CFPB has ordered the company to stop its unlawful practices and pay a $9 million penalty.
According to the Bureau, between Oct. 3, 2016, and Sept. 17, 2021 TitleMax made at least 2,670 prohibited auto title loans to borrowers covered under the Military Lending Act. It also charged borrowers unlawful fees on about 15,000 loans. Specifically, the CFPB said TitleMax and its subsidiaries harmed military families and other consumers by, among other things:
- Making illegal loans at unlawful rates and covering up their behavior. “TitleMax made illegal auto title loans to military families at annual interest rates over 36% and many times over 100%. TitleMax offered the loans while withholding information about military families’ rights under the Military Lending Act – under which both title loans and annual interest rates above 36% are illegal. Its loans also included mandatory arbitration clauses and unreasonable notice provisions that the Military Lending Act prohibits. TitleMax covered its tracks by, among other actions, doctoring personally identifiable information so borrowers would not be identified as servicemembers or covered dependents.”
- Charging unlawful fees for a useless product. “TitleMax charged fees for a useless product on thousands of loans. The company claimed the fees were for an insurance product to protect the company against potential losses, but the product did not provide any coverage for these loans. The company also charged fees for this product on loans that did not qualify for coverage.”
Enforcement Action
In addition to ending its illegal lending practices, the CFPB order requires TitleMax to:
- Pay $5.05 million to consumers. TitleMax is required to provide redress to consumers for payments made on illegally charged fees and the interest paid on those fees, payments made on illegal loans, the loss-of-use of funds, the loss-of-use of vehicles that were wrongfully repossessed, and the replacement value of vehicles that were sold after being wrongfully repossessed. Consumers are not required to take any action to get the money to which they are entitled.
- Stop illegal lending practices. TitleMax must implement and maintain robust internal controls and testing to prevent and detect potential law violations. To hold TitleMax accountable for future compliance, all findings identified through these internal controls and testing measures are reported directly to TitleMax’s chief officers for resolution.
- Pay a $10 million fine. TitleMax will pay a $10 million penalty, which will be deposited in the CFPB’s victims relief fund.