The Consumer Financial Protection Bureau on Monday fined a large auto title lender $9 million for failing to disclose the terms and costs of its title loans in three states and for illegally exposing consumers' information to their employers.
The CFPB took action against TMX Finance, the Savannah, Ga., parent company of TitleMax and TitleBucks, for luring consumers in Alabama, Georgia and Tennessee into renewing loans without disclosing terms and costs over a five-year period beginning in mid-2011. The company sells auto title and personal loans through 1,300 stores in 18 states.
The order requires that TMX stop misrepresenting the terms, length or cost of its loans. The company also cannot encourage consumers to take longer to pay a 30-day loan. Additionally, the firm was ordered to stop making in-person visits to collect debts.
"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 press release. "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."
TMX said it had discontinued using a "voluntary payback guide'' that the CFPB alleged did not provide or explain the true cost of loans after multiple renewals. The company said it also has prohibited in-person collections activities at consumer residences and workplaces.
TMX emphasized that the consent order did not require any payment of restitution to 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, the president of TMX Finance, said in a press release. "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."
Single-payment auto title loans typically are due in 30 days and carry annual percentage rates of up to 300%. To qualify, a consumer must hold title on a lien-free vehicle as collateral.
The CFPB found that TMX created a sales pitch for its 30-day auto pawn loans that included a "monthly option," which allowed borrowers to repay smaller amounts over a longer period but dramatically increased the loan's costs.
TMX Finance employees also unlawfully exposed sensitive personal information during "field visits" to consumers' homes, employment and references in attempts to collect debts, the CFPB said.
TMX is required to submit a compliance plan to the bureau within 60 days. The $9 million penalty goes to the CFPB's Civil Penalty Fund.