After years of financial ups and downs, Gloria Whitaker needed the cash quickly to help keep a roof over her head.
So she and her son, Devon, went to a TitleBucks store in Las Vegas and took out a $ 2,000 loan, pledging her 2002 Ford F-150 gold truck as collateral.
Whitaker, 66, said no one had verified that she or her unemployed son could repay the loan, which bore interest at 121.545%. When she paid off the loan, she said, the company did not return title to the truck. Instead, employees convinced her to borrow an additional $ 2,000, she said.
âI struggled,â Whitaker said. âI was between a rock and a hard place,â which included a family illness.
In October, Whitaker filed a complaint with state regulators, who accused TitleMax, owner of TitleBucks, of violating state loan laws and found the company overcharged Nevada customers over of 6,000 times this year nearly $ 8 million.
âOur position is that they are a bad actor,â said George Burns, who heads the Nevada Financial Institutions division. “We want them to conduct their business legally and not take advantage of the public.”
Still, securities lenders seem to be growing. TitleMax and two other large loan companies – all three based in Georgia – operate around 3,000 stores under a host of eye-catching brands, such as LoanMax and Fast Auto Loans. None would comment on this article.
But securities lenders have resisted tighter state oversight of their operations behind millions of dollars in campaign contributions, aggressive challenges to regulators seeking to curb them, and well-drafted loan agreements that leave borrowers aggrieved. few legal remedies, a Center for Public Integrity investigation found.
Among the discoveries:
â Three major securities lenders, their owners or key executives, injected just over $ 9 million into the state’s political campaigns over the past decade as they sought to block reform legislation. Since 2011, around 150 bills to cap interest rates or crack down on credit abuse have died in 20 state legislatures.
In Virginia, where the Big Three lenders have distributed about $ 1.3 million in campaign money over the past decade, five reform bills have died this year. In Tennessee, more than two dozen similar measures have failed in the past five years.
â Public banking and consumer regulators mainly impose fines or other civil penalties that do not appear to stop credit abuse. Illinois officials have fined TitleMax stores approximately 90 for more than $ 527,000 in the past 18 months. Some state citations have accused TitleMax and other lenders of mis-underwriting loans with repayment terms that have eaten up more than half of the borrower’s monthly income.
â Securities lending contracts require borrowers to resolve disputes through confidential arbitration hearings. It thwarted dozens of lawsuits accusing lenders of a series of deceptive tactics.
Arbitration is popular with customer finance companies. The Federal Bureau of Consumer Financial Protection announced in October that it was considering banning arbitration clauses, arguing that they amounted to a “free pass” that allows companies “to avoid making claims. accounts to their customers “.
It is legal in about half of the states to pledge car title as security for short-term loans of a few hundred dollars or more. Many of these states allow lenders to add interest up to 300%, and to foreclose and sell cars when borrowers don’t pay.
Securities lenders insist that they provide a vital financial service to people who cannot take out a bank loan or obtain credit when they need quick cash.
Consumer advocates scoff at this notion. They argue that securities lenders prey on low-income people by putting their cars, often their biggest or only asset, at risk. Title lenders in four states – New Mexico, Missouri, Tennessee and Virginia – have repossessed at least 92,000 cars in the past two years, according to state records.
âThe person who paid for their car is starting to move up the ranks a bit,â said Jay Speer, executive director of the Poverty Law Center in Richmond. Virginia is home to nearly 500 securities lending stores.
âWhen you get one of these loans, you’re right up and down and in bad shape,â he said.
Whitaker, a retiree, has a history of financial instability, including bankruptcies. She also admits that her “biggest mistake” was not carefully reading the fine print of the loan agreement.
Whitaker, in his complaint to the state, said his income was $ 1,055 per month, mostly from Social Security. Yet the first loan she took out in late 2013 required her to pay $ 265 per month.
She and her son, now 30, subsequently took out a second loan of $ 2,000, even though he had no income. They signed an affidavit stating that they could process seven monthly payments of $ 410.68, for a total of $ 2,874.71.
âWe didn’t have the capacity to repay the loans, and TitleBucks knew it,â she wrote in her complaint.
Venicia Considine, a lawyer with the Legal Aid Center of Southern Nevada who has helped the Whitaker family, said many borrowers are renewing their loans to keep the repo man at bay.
Securities lenders, she said, âbleedâ people âuntil there’s nothing left. Then they get their car back.
Devon Whitaker has not lost his truck. TitleMax agreed at the end of November to accept a payment of $ 580 and release the title of the truck, Considine said.
TitleMax, in a 2013 Securities and Exchange Commission filing, reported $ 577.2 million in loans outstanding as of December 2012. The Savannah, Ga.-Based lender says it is filling a void for growing legions of people the banks won’t touch.
Unlike banks, they don’t check a borrower’s credit before offering a loan or report defaults to credit bureaus. The company argues that it only seizes cars as a “last resort,” not until “we have first exhausted all reimbursement options,” according to the SEC filing.
TitleMax promises money “in as little as 30 minutes”. A store window in Charlottesville, Virginia screams “instant approval” and “bankruptcy OK.”
A little over 3 kilometers away, competitor LoanMax boasts: âWe say yes. A hand-scribbled message on the front window reads: âRefer a friend. Get $ 100.
It is difficult to assess how quickly the securities lending market is growing. But in Illinois, where three in four borrowers earned $ 30,000 or less per year, title loans nearly doubled between 2009 and 2013, according to the Illinois Department of Financial and Professional Regulation. Authorities in California reported in July that securities lending had more than doubled in the past three years.
Some states, such as Wisconsin and Tennessee, keep a series of securities lending records secret. In Virginia, securities lenders are opposing a request by the Center for Public Integrity for the 2014 annual reports they submitted to state banking regulators.
Lenders have pushed back on efforts by states to impose restrictions on lending while giving heavily to lawmakers’ campaigns. Together, securities lenders have made $ 9.1 million in state campaign contributions over the past decade, according to analysis of data collected by the National Institute on Money inState Politics.
Roderick Aycox of Alpharetta, Georgia, along with his businesses and relatives, has donated nearly $ 4 million. They do business as Select Management Resources, LoanMax, Midwest Title Loans and other brands.
TitleMax has donated nearly $ 3.8 million, including donations from its leaders and president, Tracy Young.
Robert I. Reich, CEO of Community Loans of America in Atlanta, which listed over 100 affiliates such as Fast Auto Loans, and its companies donated just over $ 1.3 million.
The donations have “no doubt” doomed opposing bill lenders, New Mexico Democratic State Senator William Soules said. He cited as an example an unsuccessful bill he tabled in December 2014 to cap interest at 36%.
âThere is a lot of money being made on the poorest and most vulnerable people in our state,â Soules said.
A similar bill proposed earlier this year by Democratic Missouri Rep. Tracy McCreery has never been heard. She also blamed campaign donations by lenders to politicians from both parties which totaled $ 200,000 over the past decade.
âIt’s disgusting,â McCreery said. “The vast majority of the legislature is ready to look away from the need for reform.”