Wisconsin Auto Title Loans agrees to $2.75 million settlement
UPDATE: Checks have been issued as part of the Wisconsin Auto Title Loans Inc. settlement. If you were expecting payment but did not receive one, please see this story for a possible explanation and guidance on what to do. you have to do if you have any questions.
After a 10-year battle, state officials and the Legal Aid Society of Milwaukee announced that they have reached a $2.75 million preliminary agreement with Wisconsin Auto Title Loans Inc.
If approved by a judge later this year, the deal will secure nearly $2 million in compensation for tens of thousands of customers the company allegedly tricked or coerced into paying for car club memberships. type insurance, which was marketed as optional. This is on top of already high interest rate loans of over 300%.
As part of the agreement, Wisconsin Auto Title Loans will extinguish all finance charges and fees accrued on its approximately 36,000 accounts, the Wisconsin attorney general’s office said in a news release Monday. State officials estimate this will amount to millions of dollars. Wisconsin Auto Title Loans will also release any existing liens on such borrowers’ vehicles.
Wisconsin Auto Title Loans is based in Green Bay and operates 22 locations across Wisconsin. It provides short-term loans to vehicle owners by putting liens on their auto titles, usually for much less than the cars’ blue book values, from $300 to $10,000.
Annual interest rates are up 300%. The loans were generally expected to be repaid within a month, but many borrowers were unable to repay the loans in full within a month, the complaint states. The loans are generally intended for people with very low incomes or poor credit history.
In addition to loans, Wisconsin Auto Title Loans has also enrolled customers in an insurance “auto club” type service, which reimburses the member for a small portion of services in the event of an emergency, such as $15 in the event of a flat tire. , $50 for roadside assistance and $100 for legal fees in the event of an accident.
In some cases, company employees claimed that optional membership was a one-time or mandatory fee to obtain a loan. Most consumers did not pay club fees up front, so the amount was added to their high-interest loan, officials said.
In one case, a consumer took out a $700 loan and seven months of club membership for $105. The interest on the loan was 360%, so for the first month the client paid $31.07 in interest only, the complaint states.
“Although the product is meant to be optional, consumers reported not knowing they purchased the product or being told the product was a required purchase with their title loan,” the attorney general’s office said. “In most cases, the additional cost was rolled into the total loan amount and became subject to the high interest rate attached to the loan.”
State law requires that all finance charges be disclosed in advance. They weren’t, meaning the interest rates referenced to customers were inaccurate, the state said.
“I am particularly pleased with the outcome of this case because people are often already suffering financial hardship, and it is disturbing to see these individuals being targeted by a deceptive scheme,” Attorney General JB Van Hollen said in a statement.
According to the press release, customers who purchased Wisconsin Auto Title Loans’ Continental Car Club service membership between January 1, 1999 and December 31, 2010 will be eligible for a cash payment from a restitution fund if they have paid as much, or more, than the money they received from the business when they took out the loan.
Wisconsin Auto Title Loans customers who may be eligible for a refund will be notified by letter Sept. 27, the state said.
Milwaukee County Circuit Judge Michael D. Goulee previously approved the settlement on Sept. 6.
A judge has yet to make a final decision on whether to approve the settlement at a hearing scheduled for Dec. 10. Consumers who do not want to be part of the settlement can either opt out or object before it does.
By September 27, state officials plan to create a website called www.titleloansettlement.com which will detail the terms of the settlement. Beginning September 27, affected customers can also call (877) 435-4065 for more information on the terms of the settlement.
Wisconsin Auto Title Loans denies doing anything wrong or that any customers were injured or “resulted in actual damages,” according to the settlement.
“Nevertheless, the defendant has concluded that it is desirable and beneficial to the defendant that the action, including any claim for attorneys’ fees, be settled to avoid the burden, expense, risk, inconvenience and substantial distractions from ongoing litigation,” the settlement states. .
The case began in 2002 as a private class action lawsuit brought by the Legal Aid Society of Milwaukee, which alleged that Wisconsin Auto Title Loans engaged in false, deceptive, misleading and impermissible conduct in selling contracts mandatory “car club” service in connection with auto title loans.
The state, including the Wisconsin Department of Financial Institutions and the Department of Agriculture, Commerce, and Consumer Protection, then stepped in to seek consumer restitution, penalties, and other relief under the State consumer protection laws.
The “arm’s length negotiations” between the company and plaintiffs spanned more than a decade, the settlement says.
As part of the settlement, Wisconsin Auto Title Loans would be prohibited from selling Continental Car Club memberships for two years after the day of the judgment, which would result in more than $3 million in lost revenue for the company. said the AG’s office.
Wisconsin Auto Title Loans is owned by Community Loans of America.
For more consumer stories, visit the Public Investigator’s blog at jsonline.com/piblog.