Update: The AG announced on January 26, 2016 that court granted the preliminary injunction against the company. The AG also warned that if the company continues to ignore the lawsuit, he will seek a default judgment that would effectively cancel the loans issued by the company.
On January 14, the Michigan Attorney General (the “AG”) filed a complaint in Michigan state court against a title loan company, seeking a temporary restraining order and other relief for alleged violations of the Michigan Consumer Protection Act and other state laws.
The complaint alleges that the defendant company enters into consumer loans in Michigan and elsewhere for between $1,000 and $5,000. The loans are secured by the consumer’s vehicle, on which the defendant requires the consumer to install a GPS tracking device (to facilitate repossession). These loans allegedly carry average interest rates of 231% APR, and have large balloon payments exceeding the principal loan amount.
The AG further alleged that the defendant labels such loans as “pawn transactions,” without being registered with the state as a pawnbroker. The defendant’s “pawn ticket and agreement” states that the defendant may repossess the consumer’s vehicle upon default without prior notice, or, even absent default if the defendant “deems itself insecure.” Further, consumers are not made aware of the balloon payment, high APR, or pawn form of the loan transaction before finalizing the loan.
According to the AG, at least 440 Michigan residents entered into these purported “pawn ticket and agreement loans” with the defendant. At the time the complaint was filed, the defendant allegedly had thirteen repossessed vehicles in its possession. The AG argued that immediate action was necessary to prevent the defendant from removing those vehicles from the state, as it has done in the past.
The AG requested an ex parte temporary restraining order prohibiting the defendant from making or collecting on any loan with Michigan residents, among other acts. The AG further requested that the Court enter a permanent injunction ordering that the defendant cease conducting business, including making loans, without being properly certified or licensed, and permanently cancel all consumer debt arising from the alleged practices; declaring that each of the defendant’s loans is uncollectable; and requiring that the defendant pay civil penalties and restitution.