Virginia Supreme Court decision keeps title lenders' financials private

Center for Public Integrity appeal follows investigation into high-interest loans

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The Virginia Supreme Court has ruled against an appeal by the Center for Public Integrity asking that state regulators be required to release financial documents filed by title-loan companies.

Rather than deciding whether the financial reports were public records exempted from disclosure, the court issued a procedural ruling Thursday that the Center failed to show how Virginia’s State Corporation Commission erred in not releasing the reports. The SCC regulates utilities, banks, insurance and securities companies.

“Even if the Commission ultimately had concluded that the Center's interpretation of [the law] was correct, that would only mean that the statute does not prohibit the Commission from releasing the reports,” the court wrote in its opinion in Center for Public Integrity against TitleMax of Virginia, Inc., et al. “It would not mean that the Commission is required to release them.”

Scott Surovell, who argued the case for the Center, said the Supreme Court took a “hyper-technical view of our argument,” rather than ruling on whether a corporation can be considered an individual, whose financial information cannot be released.

The Supreme Court case grew out of a 2015 Center for Public Integrity investigation into the business practices of the nation’s three largest title-loan lenders, TitleMax of Virginia Inc.; Anderson Financial Services LLC, doing business as LoanMax; and Fast Auto Loans Inc.

The ruling does nothing to address what Surovell called the “real problem,” which is that the SCC isn’t subject to Virginia’s freedom of information act, which means it is not clear what the commission must disclose to the public.

“In FOIA world, you have to cite an exemption” to defend not releasing information, Surovell said. “In SCC world, it’s not clear what the rule is,” which leaves secret large amounts of information the commission has on file.

Surovell, who also is a Democratic state senator representing a district in Northern Virginia, said that without better guidance from the courts or Virginia’s state legislature more legal challenges to the SCC will likely occur.

The title-loan industry, which is dominated by the three Georgia-based companies, has come under fire from consumer advocates and some lawmakers as predatory, charging interest rates that can exceed 300 percent in some states and seizing the cars of borrowers who fail to repay their loans — typically low- to middle-income individuals.

The Center found that states have tried to establish tighter regulations over the industry’s lending practices, but title lenders have fended off those efforts, thanks in part to millions of dollars in campaign contributions, aggressive challenges to regulators who seek to rein them in and loan contracts written so that aggrieved borrowers have little legal recourse.

The SCC releases aggregate data on title lending in the state, reporting in 2014, for example, that nearly 500 title loan shops operated in Virginia and charged an average interest rate of 222 percent. But the agency doesn’t release information specific to each lender in its report, including detailed sales figures, volume of loans, interest rates, the number of cars repossessed when borrowers default, and how often the lenders get into trouble with state and federal regulators.

“This is important information,” Surovell said. The data can show if one lender has more loan defaults, charges much higher interest rates, repossesses more cars or has an inordinate number of regulatory judgments, he said.

“We need to know these things to understand whether the title-lending industry is working properly,” Surovell said.

As part of its investigation, the Center requested the financial reports the three title lenders file with the Bureau of Financial Institutions, which is part of the SCC. Bureau officials reported to the SCC that it could not find any legal basis for keeping the records private but also told lenders they could file petitions with the SCC if they objected.

They did. As a way to resolve the dispute, state officials gave the title loan companies a chance to submit redacted copies of their annual reports and cite a legal basis for withholding any portion of the reports. The reports were heavily redacted. In one report, Fast Auto Loans disclosed that it operates 69 stores in Virginia, but little else.

The title lenders argued to the SCC that the financial information is protected under Virginia law, which doesn’t allow the SCC to release “personal financial information,” and the SCC should treat the companies like it does any individual. The companies argued the information contained “trade secrets” and releasing it to the public would cause “irreparable damage.”

The SCC ruled in March 2016 that the term “personal financial information is ambiguous since it can be understood in more than one way for the purpose of this statute.” The commission also directed its staff to seek “clarification” of the law from the state legislature.

The Center filed an appeal with the Virginia Supreme Court.

The court noted in its written opinion that the SCC “did not resolve this ambiguity” and that it was the “historical practice” to treat the “annual reports as confidential, and there has been no statutory change that would require a change in that practice."

“As the Commission found, there is no statute ‘that would require a change in [its historic] practice’ of only releasing the cumulative data from the reports in an aggregated form,” the court ruled.

A bill that would make the reports public was introduced in the Virginia General Assembly this year by Sen. Creigh Deeds, a Democrat who represents a district including Charlottesville, Virginia. But it was tabled pending the outcome of the Supreme Court case. The bill is likely to be re-introduced.

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