CFPB orders TitleMax to pay $15M for illegal loans to servicemembers

The Consumer Financial Protection Bureau on Thursday ordered auto title lender TitleMax to pay a $10 million fine and $5 million in restitution for overcharging servicemembers and altering the personal information of military borrowers to avoid detection. 

The CFPB said that TitleMax, based in Savannah, Georgia, doctored personally identifiable information so military borrowers and their dependents would not be identified as servicemembers covered by the Military Lending Act. The company made illegal auto title loans to servicemembers above the 36% annual interest rate cap and overcharged other borrowers on fees and useless insurance products that provided no coverage, the CFPB said.  

From 2016 to 2021, TitleMax originated at least 2,670 auto title loans to military borrowers. The company also charged borrowers unlawful fees on 15,000 loans for an insurance product that did not provide any coverage, the bureau said. Borrowers who did not qualify for the insurance product also were charged fees, the bureau said. 

"The CFPB order stops TitleMax's illegal predatory lending to military families — sometimes even taking steps to hide evidence of its wrongdoing," CFPB Director Rohit Chopra said in a press release. 

"Our legal action is the CFPB's first against a nonbank lender for providing title loans to military families."

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TitleMax was fined $9 million by the CFPB in 2016 for failing to disclose costs of title loans in three states and for illegally exposing consumers' personal identifiable information to their employers. In 2019, California fined the company for allegedly violating the state's interest rate cap. 

TitleMax, a unit of TMX Finance, offers small dollar title loans typically for 30 days for which borrowers put up their car or truck as collateral. TitleMax sells auto title and personal loans through 1,000 stores in 18 states. The company did not respond to a request for comment. 

The order requires TitleMax to pay $5.05 million in redress to consumers for payments made on illegal loans, illegally charged fees and the interest paid on those fees, as well as for so-called loss-of-use of funds and the loss-of-use of vehicles that were wrongfully repossessed, and the replacement value of vehicles that were sold after being wrongfully repossessed, the CFPB said. 

The CFPB ordered the company to implement and maintain robust internal controls and testing to prevent and detect potential violations.