Feds fine TitleMax's parent company $9M over loan practices

The Consumer Financial Protection Bureau (CFPB) is fining the parent company of TitleMax, a title loan lender, $9 million for luring consumers into costly loan renewals with misleading information about terms and costs. 

The agency on Monday said the company, which offers loans in exchange for a customer’s car title, also used debt collection tactics that illegally exposed information about debts to borrowers’ employers, friends and family.

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“TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal,” CFPB Director Richard Cordray said in a statement.

"They then followed up with intrusive visits to homes and workplaces that put consumers’ personal information at risk.”

The CFPB said it found store employees, as part of their sales pitch for a 30-day loan, were offering consumers a “monthly option” for making loan payments and giving out a “Voluntary Payback Guide” that showed how to repay the loan with smaller payments over a longer time period.

However, the guide and sales pitch neglected to explain the true cost of the loan if the consumer renewed it multiple times. 

In addition to the $9 million fine, the CFPB has prohibited TMX Finance from giving out payback guides or encouraging consumers to take longer to pay than the term of the original loan.

The company is also prohibited from visiting a customer’s home or workplace in person to collect payment.

TMX Finance did not admit to CFPB’s findings, but said the resolution settles the feds investigation while still allowing the company to meet the urgent financial needs of its customers.

“Many of our customers have nowhere else to turn when they suffer from short-term financial setbacks like medical emergencies or home repairs, and we are committed to remaining a reliable source of credit for them when the need arises,” Otto Bielss, president of the TMX Finance Family of Companies, said in a statement.

“We continue to focus on enhancing and strengthening our compliance program to support responsible lending practices and our compliance with applicable state and federal consumer lending and consumer protection laws.”

This story was updated at 9 p.m.