The Consumer Financial Protection Bureau (CFPB) has detailed an order against short-term consumer loan business TitleMax, alleging the company offered unlawful title loans and overcharged military families.
“The CFPB’s order stops TitleMax’s illegal predatory lending to military families – sometimes even taking steps to hide evidence of its wrongdoing,” CFPB Director Rohit Chopra said. “Our legal action is the CFPB’s first against a nonbank lender for providing title loans to military families.”
According to the CFPB, the order requires the company to pay over $5 million in consumer relief and a $10 million civil money penalty. CFPB alleged TitleMax violated the Military Lending Act by extending prohibited title loans to military families and, oftentimes, charging nearly three times over the 36 percent annual interest rate cap.
The CFPB indicated, according to TitleMax, consumers can receive a title loan of up to $10,000, and the Georgia-based company has locations in 18 states – adding auto title loans are small-dollar loans with charges and short terms of usually 30 days or less. Borrowers are required to put up their car or truck title for collateral.
Per the CFPB, the Military Lending Act protects service members, their spouses, and their children by, among other protections, prohibiting nonbanks from extending auto title loans; capping interest rates at 36 percent; banning waivers of rights under consumer financial protection laws; banning automatic payments from paychecks to pay back loans; and banning prepayment penalties.