Blog Enforcement Watch May 03, 2016

North Carolina State Court Grants TRO Against Unlicensed Auto Lenders for Excessive Rates

On May 2, 2016, the North Carolina Attorney General (“AG”) announced that a state court judge temporarily banned online auto lenders from engaging in allegedly deceptive lending practices, including charging unlawful fees.

The North Carolina AG filed suit against the unlicensed lenders for allegedly charging excessive interest rates and engaging in illegal repossessions in violation of state law.  The companies offered customers vehicle title loans, which are small loans secured by a consumer’s car title.  According the North Carolina AG’s motion, the company made loans ranging from $1,000 to $2,500 to at least 700 consumers with average interest rates of 257%.  These loans are capped by law at 30% for licensed lenders and 16% for unlicensed lenders, like defendants.  Many of these loans included a final balloon payment tacked on at the end of a consumer’s first 11 monthly payments—an amount which was even larger than the original loan amount.  And when consumers could not make these payments, the defendant would repossess cars with little to no warning, using a GPS tracker it had borrowers install in their cars.