TitleMax and Nevada agency clash over auto title lending
TitleMax, one of the nation’s largest auto title lenders, clashed with the state agency that licenses and regulates Nevada’s banks and predatory lenders on Monday.
On the first day of the hearing, both parties presented their cases to an administrative law judge at the agency’s offices in Las Vegas.
Based on legal documents, the state’s Financial Institutions Division estimates that there may be approximately 6,140 cases as of 2015 in which TitleMax or TitleBucks overcharged securities lending customers. Based on a 2-5 percent sample, with an average surplus of $ 1,288, the agency accuses TitleMax of pocketing an additional $ 7.9 million.
The difference for a Henderson customer who borrowed $ 4,400 against a 2004 Nissan Frontier was $ 7,213 for the original loan versus $ 8,748 for the modified loan, according to the documents.
TitleMax lawyers say the state agency is trying to redefine vague state law with room for interpretation.
In 2014 and 2015, state examiners visited all TitleMax sites, 42 of them at the time when scrutineers proposed an amendment to the original 210-day loan, a deferred payment deferral during which customers made smaller payments by paying only interest. In some cases, during the first seven months without decrease in capital. During the second half of the year, which also generally seemed to be a seven month period, payments were made solely on the principal.
The original TitleMax loan is a 210 day product. Nevada law allows up to 210 days for title loans. Grace periods are consistent as long as there is no interest or additional charge. The amendment maintains the annual interest rate of 170%, but more money is made over a 14-month period compared to the original seven-month loan.
Patrick Reilly of Holland and Hart, outside counsel for TitleMax, told the hearing that the grace period extension is a loan restructuring that reschedules payments without forcing borrowers to default.
He said the company stopped proposing the change to the grace period in December 2015 in good faith.
“Defects have almost doubled at TitleMax,” he said. “Thank you, Financial Institutions Division.”
The state agency, backed by the attorney general’s office, is pursuing fines of $ 10,000 for each violation found and restitution to customers.
It is legal for an owner of a vehicle who has been repaid to borrow money through a Nevada title loans on internet. But the application hearing determines whether a complementary loan modification was an illegal ploy to collect more interest or a grace period according to state law, helping customers avoid default and repossession. of their vehicle.
The hearing is expected to continue this week. Once this is over, the administrative judge will have 20 days to rule.