New York Attorney General Eric T. Schneiderman's office announced agreements Tuesday with 10 businesses that will limit their marketing of title loans, a type of payday loan, to residents of the state.
Payday lenders market title loans to consumers with poor credit histories as a quick way to obtain cash. Borrowers must pledge their motor vehicles as collateral but the ten companies that made agreements with the attorney general's office will no longer repossess vehicles at the request of title loan companies.
To make these loans seem affordable, title loan companies often require that consumers pay only the interest each month. At the end of the loan, consumers are often stunned to learn that they must then make a balloon payment for an amount that often exceeds the entire principal of the loan. If the consumer is unable to make the balloon payment, the title loan company repossesses and sells the consumers motor vehicle.
The state of New York has strict laws on interest rates that may be charged by unlicensed lenders that are not or federally or state-chartered. Unlicensed lenders may not charge an interest rate of more than 16%.
In an attempt to skirt this law, title loan companies do not set up shop in the state but peddle their services over the Internet and consumers apply online. These companies do not issue loans based on the credit status of consumers or their ability to pay it back, but rather on the value of the consumers motor vehicle.
The following companies made agreements with Schneiderman's office:
Advanced Recovery of New York, Inc. (Rochester, N.Y.)
ALSCO of Buffalo (Buffalo, N.Y.)
Buffalo Auto Recovery Service, LLC (Buffalo, N.Y.)
Del Mar Recovery Solutions, Inc. (Carlsbad, Calif.)
Empire Auto Recovery, Inc. (Plainview, N.Y.)
Minnesota Repossessors, Inc. (Maple Grove, Minn.)
Priority Recovery, Inc. (New Windsor, N.Y.)
Tri-City Auto Recovery, Inc. DBA TCAR Recovery & Remarketing Services (Burnt Hills, N.Y.)
Victory Recovery Services, Inc. (Buford, Ga.)
Loss Prevention Services, LLC (Grandville, Mich.)