The Consumer Financial Protection Bureau (“CFPB”), a federal agency that does the important work of monitoring businesses that prey on consumers and enforcing consumer-protection laws against companies that break them, recently announced a $10 million fine against the company commonly known as TitleMax (CFPB Action Against TitleMax).
The primary thrust of the CFPB’s action against TitleMax concerned its violations of the Military Lending Act (“MLA”). The MLA (About the MLA) is a federal statute that provides particular, consumer-credit-related protections to active-duty servicemembers, their spouses, and specified dependents. One important protection includes a general prohibition against compelling active-duty servicemembers to mandatory arbitration (Blog: Arbitration and the MLA). Another important protection includes a hard cap of 36% on the annual percentage rate that a range of creditors may charge on a variety of credit products. In 2015, the Department of Defense expanded those products to include title and payday loans, amongst other types of credit. It is this MLA provision, as well as that concerning arbitration and some related protections, that the CFPB fined TitleMax for breaking.
Generally speaking, a 36% interest rate is very unattractive and it would seem that a creditor shouldn’t find that provision of the MLA difficult to comply with. However, title loans commonly entail rates in the 200-300% range and it’s fair to say that, broadly, title lending is a predatory and unsavory business. Needless to say, borrowers who find themselves resorting to title loans are likely in dire financial straits. If they happen to be servicemembers on active duty, they may well be preparing to report to a new base, perhaps overseas. Having to deal with such stress, when compounded by, for example, a title loan with a 300% rate and the real possibility of having their vehicle repossessed because of that, would be unacceptable – for the military, the servicemember, and the servicemember’s family. The MLA exists to keep creditors from preying on servicemembers when their attention must be focused elsewhere.
The CFPB noted that TitleMax was a “repeat offender” (CFPB Action Against TitleMax). TitleMax has also been sued for, amongst other things, wrongful repossession of a vehicle (Blog: Jaramillo). Bell Law, LLC, specializes in consumer protection and is especially interested in protecting members of the military from unscrupulous creditors, such as TitleMax, that seem to have little regard for the federal protections afforded active-duty servicemembers.
DO YOU THINK TITLEMAX MAY HAVE TAKEN ADVANTAGE OF YOU?