Delaware-based TitleMax illegally charged customers interest rates of 132%, running a “sophisticated loan sharking operation,” a new class action lawsuit alleges.
The class action lawsuit was filed in Pennsylvania by lead Plaintiff David Mayo, who alleges TitleMax violated Pennsylvania’s Loan Interest Protection Law and Unfair Trade Practices and Consumer Protection laws.
According to the claim, Mayo experienced financial hardship over the past winter as a result of the COVID-19 pandemic and fell behind on bills and needed cash. Mayo has poor credit and was turned down for credit from conventional lenders, so, as a result of an internet search, he ended up applying for a loan from Titlemax.
On April 10, he got a 48-month loan from TitleMax for $7,751.39 at an annual percentage rate of 132.01%. He alleges that the total loan repayment, which includes a finance charge of $33,452.71, is $41,204.10.
“In total, TitleMax seeks to be paid a total of $41,204.10 to satisfy a loan for $7,751.39,” the claim states.
Mayo says in the class action lawsuit that the legal rate of interest for an unlicensed lender in Pennsylvania is only 6 percent per annum, meaning the permissible finance charge on his loan with TitleMax is only $986 and what the company says he owes exceeds the permissible charge by $32,466.71.
Mayo’s loan is secured by his 2020 Ford Fusion, which has a market value over $20,000, and TitleMax is threatening to come to Pennsylvania and repossess the vehicle unless he pays $33,452.71 in interest, the claim says.
“Mr. Mayo needs his Vehicle for transportation to work, and will suffer substantial and irreparable injury if the Vehicle is repossessed, including loss of income and the loss of ability to support himself,” the class action lawsuit reads.
At $858.42 per month, the payments on the loan are higher than Mayo can afford, and the $33,452.71 in interest he is scheduled to pay on the loan “is money Mr. Mayo needs for his own living expenses in Pennsylvania for basic necessities for things such as rent, food, clothing, healthcare, transportation, and communications,” according to the claim.
Mayo alleges that Titlemax hid the loan terms when he took out the loan, with the loan officer preparing the agreement on a computer with the screen facing the loan officer.
“The loan officer had Mr. Mayo accept the agreement on the computer, but the loan officer did not turnover control of the computer to Mr. Mayo so he could see the entirety of the agreement he was accepting. TitleMax did not let Mr. Mayo see the disclosure of the annual percentage rate, finance charge, total payments, or payment schedule,” the class action lawsuit claims.
According to the claim, TitleMax runs a “sophisticated loan sharking operation in which it makes small loans at triple digit rates of interest” to consumer borrowers secured by their cars.
“These loans are used to exploit borrowers with poor credit and a crushing need for cash,” it reads.
For each loan TitleMax makes to a customer in Pennsylvania, the company acquires a property interest in collateral located in the Commonwealth and records a lien on the collateral with the Pennsylvania Department of Transportation, the claim says.
However, the class action lawsuit says that TitleMax’s rates of interest violate Pennsylvania law, whose usury statute is unwaivable. It says that while TitleMax insists that it can make Pennsylvania borrowers waive the law’s protection by having them sign a loan agreement that contains a Delaware choice of law clause, that is not the case.
“The Delaware choice of law clause is unenforceable,” the claim reads.
Mayo wants to represent a class of Pennsylvania who may in the future enter into an agreement with TitleMax for a loan with an interest rate above 30 percent . He is suing for violations of Pennsylvania’s Loan Interest Protection Law and Unfair Trade Practices and Consumer Protection laws, and seeks certification of the Class, damages, attorney’s fees and costs.
Have you ever been charged an interest rate on a loan that was more than 30 percent? Tell us about you in the comments section!
Mayo is represented by Robert F. Salvin, Esq.
The TitleMax Interest Class Action Lawsuit is Mayo v. TitleMax of Delaware, Inc., in the Court Of Common Pleas, Philadelphia County, Pennsylvani
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266 thoughts onTitleMax Hides 132% Interest Rate When Loaning to People in Financial Hardship, Class Action Alleges
I got a title loan from Title Max for $1,600 and when its all said and done I will have paid them almost $20,000. That is not right at all. I have paid the loan off and been paying interest for a while now. What can I do about this? How can I get on a class action lawsuit against Title Max?