By James D. Colleran
On December 16, 2019, the Department of Business Oversight (DBO) announced that it entered into a settlement agreement with TitleMax of California, a subsidiary of the nationwide financial lender TitleMax, which operates 65 California Financing Law (CFL) branch office licenses. DBO filed an accusation against TitleMax on December 7, 2018, accusing the corporation of multiple Financial Code violations, including making false, misleading or deceptive statements in violation of Financial Code section 22161, filing a false report with the [DBO] Commissioner in violation of Financial Code sections 22159 and 22170; overcharging interest rates in violation of Financial Code sections 22303 and 22304; overcharging administrative fees in violation of Financial Code sections 22305; charging and receiving prohibited charges in violation of Financial Code section 22306.
According to its Accusation, DBO’s investigation of TitleMax’s disclosed loan files revealed that, with respect to loans of $3,100 or less, 22 of the 165 loan files demonstrated that borrowers “made their first payment on the same day their loan funded or within 3 days of funding,” suggesting to the Commissioner that TitleMax was illicitly lending borrowers amounts of less than $2,500 and imposing unlawfully excessive fees on such loans. DBO also accused TitleMax of unlawfully including Department of Motor Vehicle (DMV) registration, lien, and handling fees in the calculation of loans of a bona fide principal amount of less than $2,500, by which TitleMax “routinely overcharged interest rates and administrative fees on its loans” and, as stated in DBO’s press release, “illegally required customers to pay the lender to cover DMV charges.” In light of these accusations, DBO revoked TitleMax’s finance lender licenses on December 7, 2018.
More than a year after revoking TitleMax’s finance lender licenses, DBO settled with the company and restored its licenses. In a Settlement Agreement dated December 16, 2019, DBO issued a Desist and Refrain Order prohibiting TitleMax from participating in any further Financial Code violations, imposed a $25,000 penalty due to the Commissioner within five days of the effective date of the Settlement Agreement and ordered the repayment of $695,140.08 to 21,117 TitleMax customers who were reportedly victimized by the company’s violations. In entering the Settlement Agreement, TitleMax neither admitted nor denied DBO’s accusations, but agreed to settle to avoid “the necessity of a hearing.” So long as TitleMax remains in full compliance with DBO’s terms and conditions, TitleMax’s Financing Law licensure is to be reinstated on the condition that, “as of January 1, 2020, TitleMax will cease originating new loans in California and will engage only in servicing outstanding loans.”