On September 26, 2016, the Consumer Financial Protection Bureau (CFPB) entered into a consent order with one of the country’s largest auto title lenders, TMX Finance LLC, the parent company of TitleMax. The CFPB took action against TMX Finance for engaging in unfair, deceptive, and abusive lending acts and practices, and for engaging in unfair and illegal debt collection tactics, in violation of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531 & 5536(a)(1)(B).
TMX Finance, based in Georgia, offers title and personal loans to consumers in 18 states through state subsidiaries including TitleMax, TitleBucks and InstaLoan. These companies offered consumers single-payment auto title loans of $100 up to $10,000, usually 30 days in length, on lien-free vehicles with their title as collateral. These loans carried high interest rates, as high as 300 percent APR.
Once the TMX Finance companies informed the consumer how much he or she was eligible to borrow, they would offer a “monthly option,” requiring the consumer to renew or extend the transaction, and use a “payback guide” to show the consumer the monthly amortization schedule for the requested loan period. The “payback guide” did not disclose the total cost of the transaction or finance charges if the consumer renewed or extended multiple times. The CFPB found that the sales pitch combined with the “payback guide” was an unfair, deceptive and abusive practice under the CFPA.
The CFPB also found that TMX Finance company employees attempted to illegally collect on debts by making “field visits” to consumers’ homes, references and places of employment, directly contradicting the companies’ written policies. These debt collection practices violated the prohibitions against unfair and abusive practices under the CFPA because of the likelihood that TMX Finance company employees would disclose the existence of the consumers’ debt to third parties.
Pursuant to the consent order, TMX Finance agreed to stop its abusive loan-repayment policies by ceasing to use any “payback guide” or similar document, and ending its misrepresentative practices regarding terms of the loan. Further, TMX Finance agreed to put an end to its practice of making in-person “field visits” to the homes of consumers or their workplaces to collect payments. TMX Finance also agreed to ongoing compliance monitoring by the CFPB, including the requirement to submit a compliance report. Finally, TMX Finance agreed to a civil money penalty of $9 million.
In the CFPB’s press release, Director Cordray explained the goal of the CFPB’s actions, stating that “TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal . . . Today we are making it clear that these actions were unacceptable and illegal.”