Ten auto repossession companies will stop claiming vehicles on behalf of title-loan companies under agreements with New York Attorney General Eric Schneiderman.
The agreements aim to thwart lenders that are making auto title loansa type of high-interest credit backed by borrowers' vehiclesthat violate New York state law, according to a press release Tuesday from Schneiderman.
New York law prohibits unlicensed lenders from charging interest rates above 16%, while car title loans carry an average 300% annual percentage rate, according to a 2013 report from the Center for Responsible Lending.
Some lenders have attempted to circumvent New York law by issuing auto title loans online, then asking local repossession companies to claim vehicles when borrowers default.
"I applaud these companies for agreeing to stop obeying orders from predatory title-loan companies that take advantage of unsuspecting New Yorkers," Schneiderman said in the release. "Any other business that repossesses the vehicles of New Yorkers based on illegal title loans should recognize that my office will not tolerate this kind of behavior."
Six of the companies that entered into agreements with the attorney general are based in New York: Advanced Recovery of New York in Rochester; ALSCO in Buffalo; Buffalo Auto Recovery Service in Buffalo; Empire Auto Recovery in Plainview; Priority Recovery in New Windsor; and Tri-City Auto Recovery in Burnt Hills.
Four are based out of state: Del Mar Recovery Solutions in Carlsbad, Calif.; Minnesota Repossessors in Maple Grove, Minn.; Victory Recovery Services in Buford, Ga.; and Loss Prevention Services in Grandville, Mich. The companies that operate in markets outside of New York state will stop repossessing vehicles for title-loan lenders in those states as well, according to a spokeswoman for the attorney general.
The move follows New York regulator Benjamin Lawsky's widely publicized efforts to squelch payday lending in the state. Lawsky, who serves as the head of New York's Department of Financial Services, targeted 35 payday lenders in August for violating New York state regulations, leading nine of those companies to suspend operations. Lawsky has also waged war against high-cost lending by issuing subpoenas to 16 firms that market payday loans and recommending reforms to regulations about how banks process ACH payments for payday lenders.
Rumors have circulated in recent months of an escalating rivalry between Schneiderman and Lawsky. The New York Times reported in January that the two regulators were clashing over how to spend the $613 million share of a securities settlement with JPMorgan Chase (JPM).