FTC Takes Action Against Two Auto Title Lenders
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ilyast/iStock/Thinkstock(WASHINGTON) — A first of its kind case has targeted subprime car loans.
The Federal Trade Commission announced on Friday it has taken action against two car title lending companies, reaching settlements that will require them to stop using deceptive advertising to lure borrowers who often end up paying much more than the face value of the loan.
Sandy Brown, assistant director in the FTC’s Bureau of Consumer Protection, told ABC News the action is needed to protect consumers who are most vulnerable.
“They lure consumers in by claiming that consumers can get a zero percent loan based on a car titles,” Brown told ABC News on Friday. “The problem here is there are some very important elements of those loans that the consumers are unaware of before they walk in the door.”
The companies, First American title Lending of Georgia and Finance Select, Inc., have agreed to settle those charges, the first against title lenders.
Brown told ABC News the settlement would require the two companies to be up-front about their fees and terms.
“They must disclose what the post introductory rate of their loans are,” she said. “They have to disclose any kind of qualifying conditions. They have to disclose to consumers what the affect is of failing to make complete repayment in the introductory term.”
The FTC says vulnerable borrowers may not understand how costly these loans can be with interest rates up to 300 percent. If consumers don’t repay, promptly high finance charges pile up, and they could lose their cars
More than a million people took out a car title loan in 2013.
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