Two car title lenders settled Federal Trade Commission charges requiring them to stop using deceptive advertising to market title loans. The complaints mark the first time the FTC has taken action against car title lenders.
The complaints against First American Title Lending of Georgia LLC and Finance Select Inc. charged that the companies advertised, both online and in print, 0% interest rates for a 30-day car title loan without disclosing important loan conditions or the increased finance charge imposed after the introductory period ended.
The FTC charged First American Title Lending, which operates more than 30 locations in Georgia, with advertising a 0% offer (in English and Spanish) and failing to disclose that borrowers had to meet specific conditions to receive that rate. Borrowers had to be a new customer, repay the loan within 30 days and pay with a money order or certified funds - not cash or a personal check. If borrowers failed to meet those conditions, the offer did not apply and they would be required to pay a finance charge from the start of the loan. The companys advertisements also failed to disclose the amount of the finance charge after the introductory period ended.
Finance Select, doing business as Fast Cash Title Pawn, was charged with failing to disclose that unless a loan was paid in full in 30 days, the 0% offer did not apply and a borrower would have to pay a finance charge for the initial 30 days of the loan along with any finance charges incurred going forward. Fast Cash, which has five locations across Georgia and two in Alabama, also failed to disclose how much the finance charge would cost borrowers after the 30-day introductory period was over.
As part of the settlements, the respondents are prohibited from:
- failing to disclose all the qualifying terms associated with obtaining a loan at its advertised rate;
- failing to disclose what the finance charge would be after an introductory period ends; and
- misrepresenting any material terms of any loan agreements.
First American Title Lending is also banned from stating the amount of any down payment, number of payments or periods of repayment, or the amount of any payment or finance charge without clearly and conspicuously stating all the terms required by the Truth in Lending Act and Regulation Z.
A car title loan is typically a high cost, short-term loan, secured with a consumers car title. While advertised as short-term loans, title loans can become longer-term, high cost installment loans with payments due over several months. The annual percentage rate of a car title loan can be more than 300%. If a consumer does not repay the loan within 30 days, high finance charges can add up quickly, with a consumer paying hundreds or thousands of dollars in fees or forfeiting the vehicle.
"This type of loan is risky for consumers because if they fail to pay, they could lose their car - an asset many of them cant live without," said Jessica Rich, director of the FTCs Bureau of Consumer Protection. "Without proper disclosures, consumers cant know what theyre getting, so when we see deceptive marketing of these loans were going to take action to stop it."