Whatever your car title loan, payday loan, installment loan business… practices are, DISCLOSE THEM fully and simply. Do not deceive your customers or your employees.
Car Title Loan Stores Settle Charges They Deceptively Advertised the Cost of Their Loans. Businesses Failed to Disclose Qualifications for “Zero Percent” Loan Offers.
The Federal Trade Commission has taken action for the first time against two car title lenders, reaching settlements that will require them to stop their use of deceptive advertising to market title loans.
In administrative complaints issued against two title lenders, First American Title Lending of Georgia, LLC, and Finance Select, Inc., the FTC charged that “the companies advertised, both online and in print, zero percent interest rates for a 30-day car title loan without disclosing important loan conditions or the increased finance charge imposed after the introductory period ended.”
“This type of loan is risky for consumers because if they fail to pay, they could lose their car – an asset many of them can’t live without,” said Jessica Rich, director, FTC’s Bureau of Consumer Protection. “Without proper disclosures, consumers can’t know what they’re getting, so when we see deceptive marketing of these loans we’re going to take action to stop it.”
Car title loans are high cost installment loans with payments due over several months. The annual percentage rate of a car title loans easily exceed 300 percent. Fees add up fast and failure to pay on a timely basis results in a “repo;” forfeiting the vehicle.
The FTC charged that First American Title Lending, operating 30+ locations in Georgia, advertised a zero percent offer (in English and Spanish) and failed to disclose that the borrower had to meet specific conditions to receive that rate.
- The borrower had to be a new customer
- Repay the loan within 30 days
- And pay with a money order or certified funds, not cash or a personal check.
- If a borrower failed to meet those conditions, the offer did not apply, and he or she would be required to pay a finance charge from the start of the loan.
- The company’s advertisements also failed to disclose the amount of the finance charge after the introductory period ended.
The FTC alleged Finance Select, doing business as Fast Cash Title Pawn, failed to disclose that:
- Unless a loan was paid in full in 30 days
- The zero percent offer did not apply
- And that a borrower would have to pay a finance charge for the initial 30 days of the loan in addition to any finance charges incurred going forward.
Fast Cash, which has five locations across Georgia and two in Alabama, also failed to disclose how much the finance charge would cost a borrower after the 30-day introductory period was over.
As part of the proposed settlements with First American Title Lending and Fast Cash Title Pawn, the respondents are prohibited from:
- Failing to disclose all the qualifying terms associated with obtaining a loan at its advertised rate;
- Failing to disclose what the finance charge would be after an introductory period ends;
- And misrepresenting any material terms of any loan agreements.
In addition, First American Title Lending is also prohibited from stating the amount of any down payment, number of payments or periods of repayment, or the amount of any payment or finance charge without clearly and conspicuously stating all the terms required by the Truth in Lending Act and Regulation Z.