July 30, 2014
Car Title Lenders Find Loopholes to Overcharge Customers
Predatory lenders are constantly looking for ways to take advantage of vulnerable consumers. They will jump at the first chance to drain their finances and leave them scrambling to pay an out-of-control debt.
Some consumer advocates say usury caps are the most effective way to shield consumers from dishonest lenders advertising payday or auto title loans.
ProPublica reports that car title lender TMX Finance updated its InstaLoan lending contracts in order to unfairly profit from customers by offering new versions of the title loans that are jam-packed with costly insurance products.
Now customers are being subjected to triple-digit interest rates. This goes against a 2000 Florida law that prohibits high interest car-title loans.
“TMX’s refashioned loans are yet another example of how the nation’s high-cost lenders have modified their offerings to circumvent city, state and federal laws designed to limit them. After Ohio prohibited excessive interest rates on short-term loans in 2008, payday and auto title lenders used a loophole to offer nearly identical loans under different state laws. In Texas, TMX subsidiary TitleMax has offered customers cash for free as part of a ploy to get around city ordinances,â€ reports ProPublica.
According to the site, state regulators have not done much to contain the activity.