When you own your car or vehicle outright, it may seem irresistible to borrow against it when you need money. But if you are thinking about taking a title loan, watch out. It can cost you much more money than you think.
The latest action by the Consumer Financial Protection Bureau (CFPB) highlights what a nightmare a title loan can become. It fined TitleMax and its parent company TMX, LLC $9 million for its bad practices.
Customers who visited one of the 1300 TitleMax storefronts in 18 states learned they could borrow money against their cars for 30 days. But the interest rate was 300 percent. And often, salespeople encouraged them to spread out the payments using a “Voluntary Payment Plan.” It might have sounded great, but those plans brought the finance charges even higher and put people deeper and deeper in debt.
The CFPB charged Savanah, Georgia-based TMX Finance, LLC, parent company of TitleMax, with, “. . . luring consumers into costly loan renewals by presenting them with misleading information about the deals’ terms and costs.”
The CFPB looked at loans from July 21, 2011 to the present and found a pattern of abusive debt collection. When people failed to make payments on time, TitleMax employees made what they described as “field visits.” They went to people’s homes and offices. They embarrassed them, but worse, they shared their personal financial information with employers, relatives and friends.
As a result of its unfair lending and collection practices, TMX Finance, parent company of TitleMax, will pay a fine of $9 million.
No one goes to jail here, but the company did agree to stop its abusive practices and must submit a plan within 90 days to the CFPB outlining how it will put reforms into place.