AG Schneiderman Announces Major Agreements to Stop Marketing of Title Loans in NYS
By Long Island News & PRs Published: April 01 2014
Ten Businesses Will No Longer Repossess Vehicles From Predatory ‘Title Loans’ at Request of Title-Loan Companies.
Buffalo, NY - April 1, 2014 - Attorney General Eric T. Schneiderman today announced agreements with 10 businesses that will greatly limit the marketing of a type of payday loan, called title loans, to unsuspecting New Yorkers. Payday lenders market these loans to consumers with poor credit histories as a fast way of obtaining cash and require borrowers to pledge their motor vehicles as collateral. As part of the scheme, national companies take repossession orders centrally, then pass on orders to repossess the vehicles to local businesses in their networks. The ten companies party to these agreements will not repossess vehicles at the request of title-loan companies. Payday loans are a type of short-term borrowing where an individual borrows a small amount from a payday lender at a very high rate of interest that can vary from 100% to more than 700%. These loans often exacerbate a consumer's financial difficulties, as many consumers cannot afford to pay off the loan when it is due and must extend, or roll over, the payment period, which results in additional interest.
“I applaud these companies for agreeing to stop obeying orders from predatory title-loan companies that take advantage of unsuspecting New Yorkers,” Attorney General Schneiderman said. “Any other business that repossesses the vehicles of New Yorkers based on illegal title loans should recognize that my office will not tolerate this kind of behavior.”
New York State has very strict laws on interest rates that may be charged by unlicensed lenders that are not or federally or state-chartered. Unlicensed lenders may not charge an interest rate of more than 16%. In an attempt to skirt this law, title loan companies do not set up shop in New York State but peddle their products over the Internet and consumers apply online. These companies do not issue loans based on the credit worthiness of consumers or their ability to pay it back, but rather on the value of the consumer’s motor vehicle.
To make the loan seem affordable, title loan companies often require that consumers pay only the interest on a monthly basis. At the end of the loan, consumers are stunned to learn that they must then make a balloon payment for an amount that often exceeds the entire principal of the loan. If the consumer is unable to make the balloon payment, the title loan company repossesses and sells the consumer’s motor vehicle.
The following companies were party to the agreement:
- Advanced Recovery of New York, Inc. (Rochester, NY)
- ALSCO of Buffalo (Buffalo, NY)
- Buffalo Auto Recovery Service, LLC (Buffalo, NY)
- Del Mar Recovery Solutions, Inc. (Carlsbad, CA)
- Empire Auto Recovery, Inc. (Plainview, NY)
- Minnesota Repossessors, Inc. (Maple Grove, MN)
- Priority Recovery, Inc. (New Windsor, NY)
- Tri-City Auto Recovery, Inc. DBA TCAR Recovery & Remarketing Services (Burnt Hills, NY)
- Victory Recovery Services, Inc. (Buford, GA)
- Loss Prevention Services, LLC (Grandville, MI)
This matter was handled by Assistant Attorneys General James Morrissey and Michael Russo, Senior Consumer Frauds Representative Karen Davis and Executive Deputy Attorney General for Regional Offices Marty Mack.