The Consumer Financial Protection Bureau (CFPB) levied $15 million in penalties to corporate entities operating under TMX Finance, broadly known as TitleMax, for violating the financial rights of military families and other consumers.
In Delaware, TitleMax has offices west of Wilmington, and in Dover and Delmar.
The CFPB determined that 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 allegedly tried to hide their unlawful activities by, among other things, altering the personal information of military borrowers to get around their protected status. The CFPB also found that TitleMa increased loan payments for borrowers by charging unlawful fees. The CFPB’s order requires the company to pay more than $5 million in consumer relief and a $10 million civil money penalty.
“The CFPB’s order stops TitleMax’s illegal predatory lending to military families – sometimes even taking steps to hide evidence of its wrongdoing,” said CFPB Director Rohit Chopra. “Our legal action is the CFPB’s first against a nonbank lender for providing title loans to military families.”
TitleMax is comprised of TMX Finance LLC and numerous subsidiaries across the United States with both in-person and online locations. TitleMax’s headquarters is in Savannah, GA, and it is engaged in the business of extending short-term, high-cost consumer loans that are secured by borrowers’ vehicle titles.
According to TitleMax, consumers can receive a title loan of up to $10,000. TitleMax is privately owned, and currently has more than 1,000 locations in 18 states. A number of states do not allow title loans.
TitleMax has been under a CFPB Order since September 26, 2016, for its lending and debt-collection practices. 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 loans multiple times. The CFPB also found that the company engaged in illegal high-pressure debt collection practices. The CFPB ordered the company to stop its unlawful practices and pay a $9 million penalty.
According to the CFPB, title loans loans causes many borrowers to end up with unaffordable payments, and have to choose among defaulting, reborrowing, or skipping other financial obligations like rent, food, or medical care.
The dangers of title and other predatory loans to military families were laid out in a 2006 Department of Defense report that noted that predatory lending “undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all-volunteer fighting force.” The response of Congress was to pass the Military Lending Act, which took effect in 2007.
In recent years, the CFPB has pursued Military Lending Act claims against multiple entities, including the nation’s largest pawn lender as well as an online lender. The CFPB also shut down a lender for repeat offenses against military families.
The bureau has come under fire over the years with House Republicans, now in the majority, vowing to put the regulatory body under the microscope.
Attorneys General in Delaware and other states, along withanother federal agency were able to provide some reimbursement to military families over practices of a now-defunct jewelry store chain. Delaware received a portion of the settlement.
