After years of financial ups and downs, Gloria Whitaker needed some quick cash 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 his gold 2002 Ford F-150 truck as collateral.
Whitaker, 66, said nobody verified she, or her jobless son, could repay the loan, which carried interest of 121.545 percent. When she paid off the loan, she said, the company didn’t give back the title to the truck. Instead, employees talked her into borrowing $2,000 more, which plunged the family deeper into debt, she said. Whitaker knows that was a mistake, but also feels misled by aggressive — and legally dubious — lending tactics.
“I had a hardship,” Whitaker said. “I was between a rock and a hard place.”
In October, Whitaker filed a complaint with state regulators, who say the giant lender, TitleMax, which operates TitleBucks, violated state lending laws and estimate that it overcharged Nevada customers more than 6,000 times this year by nearly $8 million.
“Our position is that they are a bad actor,” said George Burns, who heads the Nevada Financial Institutions Division. “We believe it is very important that we get them under control. We want them to conduct their business legally and not be taking advantage of the public.”
It’s legal in about half the states to pledge a car title as collateral for short-term loans of a few hundred dollars or more. Many of these states allow lenders to tack on interest that can top 300 percent, and to seize and sell off cars when borrowers fail to pay. Most states have either permitted the companies to operate for years, or kept them out with usury laws that cap interest rates.
Title lenders insist they provide a vital financial service to people who can’t take out a bank loan or get credit when they need fast cash.
Consumer advocates scoff at this notion. They argue title lenders prey on low-income people by putting their cars, often their biggest or sole asset, at risk. Title lenders in four states alone — New Mexico, Missouri, Tennessee and Virginia — repossessed at least 92,000 cars in the past two years, according to state records.
“The person who has paid off their car is starting to move up the ladder a little bit,” said Jay Speer, executive director of the Virginia Poverty Law Center in Richmond. Virginia is home to nearly 500 title-lending shops.
“When you get one of these loans, you are knocked right back down and in bad shape,” he said.
Yet title lenders appear to be expanding. TitleMax and two other major lending companies — all three based in Georgia — run about 3,000 stores under a slew of eye-catching brand names, such as LoanMax and Fast Auto Loans. None would comment for this article.
A Center for Public Integrity investigation found that the title lenders have fended off tighter state oversight of their operations behind millions of dollars in campaign contributions, aggressive challenges to regulators who seek to rein them in and by writing loan contracts that leave aggrieved borrowers with little legal recourse.
Among the findings: