“Families who need a little extra money to deal with an illness or a layoff deserve a fair loan, not a rip off,” said Attorney General Roy Cooper. “North Carolina has long made illegal these expensive loans with excessive interest rates, and my office is here to enforce the law for consumers.”
Cooper filed suit in May against the lender, which does business as Autoloans, Car Loan, Sovereign Lending Solutions and Title Loan America for charging North Carolina consumers average interest rates of 257 percent on loans of $1,000 to $2,500. Title loans are small dollar loans secured by consumers’ car titles. State law caps interest rates on such loans at 30 percent for licensed lenders and at 16 percent for unlicensed lenders, such as the defendants.
Under an order signed by Wake County Superior Court Judge Donald W. Stephens, while the lawsuit is underway, the company and its owners are barred from making or collecting on loans in North Carolina; repossessing, selling or placing liens on any car owned by a North Carolina consumer; destroying records; and spending or transferring any money. Cooper is seeking a permanent ban on the defendants’ illegal lending business, cancellation of previous loans and liens, and refunds for North Carolina consumers.
According to the Attorney General’s investigation, the title lender has operated since 2012 under various names and appears to be based in Florida, although to evade lending laws, the business incorporated in the Cook Islands, New Zealand and previously claimed affiliation with a Native American tribe in Michigan.
As alleged in the complaint filed with the court, at least 700 North Carolina consumers took out title loans from the defendants. In addition to charging sky-high annual interest rates of 161 percent to 575 percent, most of the loans included payments on interest only for the first 11 months and a final balloon payment larger than the original loan amount. This came as a shock to many borrowers because the lender often misstated interest rates, withheld details of the loan, and failed to give consumers a copy of their written loan agreement.
The lawsuit contends that when consumers couldn’t make the onerous payments, the defendants repossessed their cars illegally. The lender sent borrowers a GPS tracker to install on their cars and placed a lien on their car titles. If a consumer paid late or missed a payment, the defendants used the GPS tracker to find and repossess the consumer’s car.
Consumer affidavits filed with the lawsuit show the impact of the illegal lending scheme. A Greensboro couple took out a loan from Title Loan America to help with medical expenses. They paid nearly $3,400 on a $2,000 loan, but were told they owed an additional balloon payment of $1,700, which they hadn’t known because they never received a copy of the loan agreement. When the couple couldn’t make the unexpected payment, the defendants repossessed their car while they were taking their daughter to school and sold the car at auction.
A Garner man borrowed $1,250 from the defendants after his in-laws became ill and needed to move in with him. He paid more than $4,000 on the loan but was told he owed nearly $4,500 more. He asked for an extension because he didn’t want to lose his car, but the defendants still towed it and sold it.
A Burgaw family facing foreclosure on their home turned to the defendants for a $2,900 loan with what they were told was an interest rate of 18 percent and a final balloon payment of $531. Months later, after repeatedly requesting a copy of the loan agreement, they learned their loan actually came with an interest rate of 218 percent and a final payment of $3,531. When they complained, the defendants threatened that they knew where the family lived and would come take their car. The family had to move their car to keep it safe.
The Attorney General’s Office has mailed letters to consumers who took out loans from the defendants to make them aware that the defendants cannot collect payments or repossess cars under the current court order. The office has also written towing companies and automobile auction houses that have previously done business with the defendants to notify them about the court’s order.
A total of eight consumers have complained to the Attorney General’s Consumer Protection Division about the defendants’ unfair loans to date. To file a consumer complaint, call 1-877-5-NO-SCAM toll-free within North Carolina or use the online complaint form at ncdoj.gov.
“Consumers who are desperate for quick cash may feel pressured to overlook the warning signs of a bad loan,” Cooper said. “If you need a small loan, talk to multiple lenders, get everything in writing, and review it carefully before you sign.”