An auto finance company will pay $15 million in fines and redress to consumers as a result of an enforcement action with the Consumer Financial Protection Bureau, the regulator announced yesterday. The lender was accused of making illegal loans to military families, altering documents so that the borrowers would not be identified as servicemembers, and charging unlawful fees for a “useless” insurance product.
A copy of the enforcement order, against TMX Finance, which is known more commonly as TitleMax, can be accessed by clicking here.
As you might have been able to deduce, TitleMax is a title lender. It operates in 18 states and has been under a CFPB consent order since 2016, related to its lending and debt collection activities. The company is accused of making more than 2,500 prohibited loans to servicemembers and their families between 2016 and 2021. Under the Military Lending Act, interest rates for servicemembers are capped at 36%. TitleMax is accused of making loans with interest rates in excess of 100%. To avoid potential problems, the company is accused of “doctoring personally identifiable information so borrowers would not be identified as servicemembers or covered dependents.” The company’s own policies and procedures made it clear that members of the military and their families were not eligible for loans. To get around this, it changed the personally identifiable information of individuals to obtain clearance from the Military Lending Act’s database that the individuals were not covered borrowers, or it failed to check the database at all.
The company is also accused of charging more than 15,000 borrowers $35 each for non-file insurance, a policy that covers losses due to the failure to record the lien on the vehicle’s title in order to protect its security interest. The problem is that TitleMax had recorded the liens on those vehicles, making the insurance unnecessary.
TitleMax will pay a $10 million fine to the CFPB and $5 million back to affected customers.