CFPB sues auto title lenders

The Consumer Financial Protection Bureau (CFPB) has sued five title lenders operating in Arizona for failing to disclose the annual percentage rate in online advertisements about title loans and is seeking civil monetary penalties and administrative orders requiring the companies to correct their practices.

Auto title loans are secured loans for which the title to a vehicle serves as collateral. A borrower who cannot repay an initial title loan must reborrow or risk losing the title to their vehicle.

The bureau alleges that the five companies, which all market their services to consumers online, advertised a periodic interest rate for their loans without listing the corresponding annual percentage rate.

For example, one lender advertised on its website a monthly interest rate but failed to include the legally required annual percentage rate for the loan. In its online advertisement, another lender asked consumers to take its advertised rate and multiply it by 12, but did not inform consumers that the calculated number is the annual percentage rate.

The five are: Auto Cash Leasing; Interstate Lending; Oasis Title Loans; Phoenix Title Loans; and Presto Auto Loans. They now face proceedings in an administrative forum, where the judge will make a recommended decision regarding the charges, and the director of the CFPB will issue a final decision, which may be appealed to a federal court. The notice of charges is not a finding or ruling that the respondents have actually violated the law.