Pennsylvania Title Loan Provider Faces Legal Action
Inside Subprime: Nov 15, 2018
By Grace Austin
The Commonwealth of Pennsylvania is going after a major auto title loan provider, accusing them of ripping off thousands of Pennsylvanians with illegally high interest rates.
An auto title loan provider is being sued for more than $3 million. The Pennsylvania Attorney General’s Office is also asking for the release of more than 1,000 title liens, refunds of repossession fees and proceeds of cars auctioned after repossession, and seeking civil penalties against the Delaware-based company. Pennsylvania Attorney General Josh Shapiro said the company has violated state usury and racketeering laws.
In Pennsylvania, payday loans and title loans are strictly regulated. The Commonwealth has a cap on interest rates at 24 percent. The title loan firm is accused of charging up to 360 percent APR, as well as charging additional fees when consumers’ vehicles were repossessed because they couldn’t pay back the title loans.
A local TV station reported one Allentown, Pennsylvania, man took out a $1,500 title loan on his car at a 360 percent APR after some financial difficulties. After making six payments of more than $450 a month ($2,700 total), the title loan firm still demanded a lump sum amount of nearly $2,000. After the consumer told the title loan firm he couldn’t make that lump sum payment, the title lender said he would have to continue making $450 monthly payments. Those payments carried on for more than a year, and even though the consumer had paid at least $5,400 by that time, the title loan firm still demanded the $2,000 lump sum amount. The title loan finally repossessed his car and ordered the consumer to pay $3,500 for the vehicle back.
Eventually, the borrower filed a complaint with the Pennsylvania Attorney General’s Office. That’s when the title loan firm negotiated down to $2,800 for the car back — an amount the consumer and his wife had to borrow from family members. Once the ordeal was over, the man ended up paying more than $10,000 to the loan provider and the repossession agent.
The Attorney General’s Office, in its Halloween filing, said more than 550 cars were repossessed in Pennsylvania since 2013 by the title loan firm , which averages out to more than 100 a year. The title loan firm made 3,200 title loans worth more than $2.5 million to Pennsylvanians. The AG’s Office said they made a hefty profit, too — the company has raked in $5.7 million from borrowers, a profit of 128 percent.
This title loan firm stopped doing new business in 2017.
As the Attorney General’s release noted, this isn’t the first time this title loan firm has gotten in trouble with the law. Two states and the District of Columbia settled with the title loan provider —the District of Columbia in 2009 for $355,000; Virginia in 2012 for $612,000; and West Virginia in 2015 for $85,000.