It has come to my attention that car title loan provider, TMX Finance LLC, also known as TitleMax, is implicated in an alleged fraudulent scheme. The corporation was accused of unlawfully issuing loans to military households and overselling them.
As a result, the Consumer Financial Protection Bureau (CFPB) commanded TitleMax to refund over $5 million to customers. In addition, they need to pay a $10 million fine to the CFPB. This decree encompasses non-military consumers too. However, how much of the $5 million will be allocated to military loan recipients remains unclear.
According to CFPB accusations, TitleMax manipulated data about borrowers’ military standing. This allowed them to authorise these loans, even though the Military Lending Act explicitly prohibits such practices. These loans were small but accompanied by high additional charges, short terms, and the borrowers’ vehicle as collateral. The result was incredibly strenuous payments if the loan needed to be renewed periodically.
Customers do not need to take any steps to receive the money. The CFPB and TitleMax have established a plan to reimburse customers for illegally attributed charges and the corresponding interest, as well as vehicles that were improperly repossessed or sold.
CFPB mandates TitleMax to terminate the above mentioned illicit lending practices, and take measures to introduce internal management procedures. This is all in light of a CFPB administrative procedure, to which TitleMax does not admit or deny any of its conclusions or findings.
While TitleMax adamantly rejects any wrongdoings, they chose to settle with the CFPB to avert time-consuming and costly lawsuits. The settlement is described as beneficial – emphasizing TitleMax’s dedication to comprehensive services for its customers.
The company made 2,670 loans to covered military borrowers between Oct. 3, 2016, and Sept. 17, 2021, despite its policy against it. Multiple loans can be made per customer, and the same loan can be renewed multiple times. A majority of these had interest rates exceeding 100%, about three times the 36% annual interest cap established by the Military Lending Act.
The CFPB has taken actions against other loan providers for violations of the Military Lending Act, like pawn dealers and online lenders. This is the first against a nonbanking loan provider for issuing title loans to military families.
The CFPB accuses TitleMax of providing misleading information to borrowers. Some of TitleMax’s employees would check the borrower’s military status, but would ignore indications of the borrower being covered by the Military Lending Act.
Contents
Frequently Asked Questions
What is the Military Lending Act?
The Military Lending Act is a legislation that protects active-duty military members and their dependents from certain lending practices. It imposes a 36% annual interest rate cap on every type of loan, with the exception of mortgages and loans made specifically for a purchase where the loan is secured by the asset.
What was the main accusation against TitleMax?
TitleMax was accused of issuing auto title loans illegally to the military families and significantly overcharging them. Furthermore, they were also charged with manipulating the military status of the borrowers to issue these loans despite the laws prohibiting such practices.
What actions did the Consumer Financial Protection Bureau (CFPB) take against TitleMax?
The Consumer Financial Protection Bureau (CFPB) has ordered TitleMax to refund consumers over $5 million for overcharged and illegal fees, and pay a civil fine of $10 million to the CFPB. Additionally, they have mandated TitleMax to stop the illegal lending practices and implement internal controls.
