One of the nation's largest title loan firms was fined $9 million for misleading consumers about their cost of borrowing, federal regulators said Monday.
TMX Finance, the parent company of TitleMax, allegedly tricked borrowers into taking out longer-term, more expensive loans, and also used illegal debt collection tactics, according to the Consumer Financial Protection Bureau. The firm was ordered to stop the illegal tactics.
TMX, in a statement, said it settled the case without admitting wrongdoing.
Title loans are similar to payday loans, advertised as short-term instruments to help consumers who find themselves in a cash crunch. With title loans, borrowers use their cars as collateral for the loans. They risk losing their cars if the loans aren't repaid on time.
According to the CFPB, some TitleMax borrowers were steered into longer-term payback plans for their short-term loans, requiring several loan renewals and significantly increasing the costs of borrowing. TMX Finance employees also conducted "field visits" to consumers' workplaces, despite knowing such visits were not permitted; the tactics were used starting on July 21, 2011, the CFPB said.
TMX Finance, which is based in Savannah, Georgia, is one of the country's largest auto title lenders, with more than 1,300 storefronts in 18 states.
"TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal," said CFPB Director Richard Cordray. "They then followed up with intrusive visits to homes and workplaces that put consumers' personal information at risk. Today we are making it clear that these actions were unacceptable and illegal."
No Customer Refunds
In a press release, TMX Finance noted it was not forced to refund any consumers as part of the agreement, "unlike consent orders that the CFPB has previously entered into with other companies within the emergency credit space."
"This resolution of the CFPB's investigation addresses and mitigates the CFPB's identified concerns while allowing us to continue meeting the urgent financial needs of our customers. Many of our customers have nowhere else to turn when they suffer from short-term financial setbacks like medical emergencies or home repairs, and we are committed to remaining a reliable source of credit for them when the need arises," said Otto Bielss, President of the TMX Finance Family of Companies. "We continue to focus on enhancing and strengthening our compliance program to support responsible lending practices and our compliance with applicable state and federal consumer lending and consumer protection laws."