Title lenders offer quick cash to anyone who can use their car as collateral, but in Georgia, lax regulation leaves many borrowers trapped in high-interest debt.

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A federal consumer watchdog group has fined one Georgia-based company $15 million for predatory lending practices. TitleMax, which is headquartered in Savannah, offers short-term loans — at exorbitant interest rates — in exchange for a lien on the title of the borrower’s car.

In its order, the Consumer Financial Protection Bureau said TitleMax had intentionally evaded laws meant to protect military families from predatory lenders and, separately, charged illegal insurance fees to more than 17,000 customers.

The federal regulator found that the company used deceptive means, including falsifying information, to issue 2,670 so-called title loans over a five-year period to military members or their dependents in violation of the Military Lending Act and in contravention of the company’s own internal guidelines.

The operations of TitleMax, the nation’s largest title lender and the dominant industry player in Georgia, have been the subject of a yearlong investigation by The Current and ProPublica. The news organizations revealed for the first time the scope and scale of the industry in the state. The stories also revealed TitleMax’s questionable practices in Georgia, which has one of the most permissive local regulatory environments for the title lending industry. Due to a loophole in state law, title lenders there are allowed to charge triple-digit interest rates that would be illegal for any other financial lender.

The 53-page CFPB Consent Order repeatedly castigated the company for a lack of meaningful internal oversight in its pursuit of revenue. Federal law caps annual interest rates at 36% for financial products sold to military members and their families. TitleMax, which counts more than 293,000 customers nationwide and posted $910 million in revenue in 2019, emphasizes in its own internal training manuals that employees should not lend to service members.

But the company did anyway. Between Oct. 3, 2016, and Sept. 17, 2021, the CFPB said, the company sold 2,670 loans to military members and their families, sometimes by falsifying personal information of the borrower to conceal the fact that they were a military member or a dependent covered by the Military Lending Act. The company lacked internal controls to catch or stop such behavior, according to the consent order.

“TitleMax’s violations were caused by intentional misconduct, a lack of internal and system controls, and no meaningful monitoring or oversight,” the consent order said. “TitleMax did not conduct any periodic monitoring or audits of its origination activity to ensure compliance with the MLA, allowing intentional misconduct and problematic practices to go unchecked.”

TMX Finance, the parent company of TitleMax, denied the allegations of wrongdoing. In a statement, the company said it agreed to pay the fine to avoid costly and lengthy litigation, saying it “would be a distraction for the Company’s core business of providing best-in-class services to its customers.” It also noted that the violations documented by the CFPB have not been proved.

The CFPB ordered that $5 million of the fine be made in restitution to consumers affected by the illegal activities and $10 million be paid to the government as a civil penalty for all the violations cited in the consent order. It also voided all the 2,670 contracts identified in the consent order as having violated the Military Lending Act.

The $15 million fine is the CFPB’s second ruling against the company. In 2016, the agency fined TitleMax $9 million after documenting deceptive practices in Georgia, Tennessee and Alabama, and the company has remained under investigation ever since.

TitleMax boasts around 1,000 storefront locations across the United States, including more than 200 in Georgia. It has publicly touted its legal and compliance teams as a “stellar example” for the industry. In commercials, it boasts that its streamlined appraisal process can approve loans in 10 minutes for people who have been written off as credit risks by traditional lending institutions but need financing to pay for life’s basic needs.

Congress passed the Military Lending Act after a 2006 Department of Defense report concluded that predatory lending “undermines military readiness” and “harms the morale of troops and their families.” Over the last decade, multiple states have moved to pass similar interest rate caps for all consumers. TitleMax and other title lenders have ceased operations in states that have passed such caps, arguing that they could not be profitable in such an environment.

Georgia, which accounts for 20% of TitleMax’s current business operations, has bucked this trend. Earlier this month, however, the chairman of the state House of Representatives Committee on Defense & Veterans Affairs introduced a bill that would end the legal loophole for title lenders that has allowed them to charge triple-digit annual interest rates to consumers and evade Georgia’s usury laws.

In an interview last week, Rep. Josh Bonner, a Republican from Fayetteville, said that protections for Georgia-based service members from predatory lenders should be granted to all Georgia residents. The bill is co-sponsored by five other representatives hailing from various parts of the state, but has not yet been endorsed by the state Republican leadership.

“If protections are good enough for our military members, they are good enough for all of us,” Bonner said.

In a second set of findings, the CFPB also cited a lack of internal oversight that allowed TitleMax store managers to charge illegal or unnecessary fees to approximately 15,000 customers. These fees were associated with the filing and canceling of liens placed on the vehicles being held as collateral in exchange for TitleMax financing.

Additionally, the CFPB has ordered the company to enact new oversight protocols, including the hiring of an outside consultant and the creation of a new internal compliance committee that includes the company president and chief executive officer. It is unclear what these requirements will cost.

TitleMax financed its own national growth through private corporate bond placements. The company has around $400 million in debt coming due in April. Its current credit ratings reports cite the ongoing federal regulatory investigation as well as increasing state regulation of title lending as cause for concern for investors.