Banking and Finance Law Daily CFPB applies brakes to TMX Finance for unlawful short-term loan practices
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Tuesday, September 27, 2016

CFPB applies brakes to TMX Finance for unlawful short-term loan practices

By Stephanie K. Mann, J.D.

The Consumer Financial Protection Bureau entered into a Consent Order and Stipulation with TitleMax parent company TMX Finance LLC for luring consumers into costly loan renewals by presenting them with misleading information about the deals’ terms and costs. The lender also used unfair debt collection tactics that illegally exposed information about debts to borrowers’ employers, friends, and family. The bureau ordered TMX Finance to stop its unlawful practices and pay a $9 million penalty.

"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."

The Savannah, Ga.-based TMX Finance is one of the country’s largest auto title lenders, with more than 1,300 storefronts in 18 states. TMX Finance offers title and personal loans through a host of state subsidiaries under the names TitleMax, TitleBucks, and InstaLoan. Single-payment auto title loans are usually due in 30 days, with some carrying an annual percentage rate of up to 300 percent. To qualify for the loan, a consumer must bring in a lien-free vehicle and its title as collateral.

Findings. The CFPB found that store employees, as part of their sales pitch for the 30-day loans, offered consumers a "monthly option" for making loan payments, said the Stipulation. They then offered consumers a "Voluntary Payback Guide" that showed how to repay the loan with smaller payments over a longer time period. But the guide and sales pitch did not explain the true cost of the loan if the consumer renewed it multiple times.

The CFPB also alleged that TMX Finance employees also unlawfully exposed sensitive personal information during "field visits" to consumers’ homes, references, and places of employment in attempts to collect debt. Some TMX Finance employees then revealed information about consumers’ past-due debt. These visits could have resulted in damage to the consumers’ reputations, interfered with their ability to do their jobs, and triggered disciplinary action or firing.

Order. Under the Consent Order, TMX Finance is required to:

  • Stop abusive loan-repayment policies: TMX Finance cannot use any payback guide or similar document and cannot misrepresent the terms, length, or cost of the loan. It also cannot encourage consumers to take longer to pay than the term of the original loan.
  • Stop intrusive visits to consumers’ homes or workplaces: TMX Finance cannot make in-person visits to the homes of consumers or their workplaces to collect payments. To make sure the company follows through, TMX Finance must submit a compliance plan for the bureau’s approval within 60 days of the order.
  • Pay a $9 million penalty: TMX Finance will pay a penalty of $9 million to the CFPB’s Civil Penalty Fund.

Companies: InstaLoan; TitleBucks; TitleMax; TMX Finance LLC

MainStory: TopStory CFPB DebtCollection EnforcementActions Loans UDAAP

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