Antitrust Law Daily Wrap Up, ADVERTISING NEWS: Car title loan companies agree to consent orders with FTC, (Jan 30, 2015)

Two finance companies accused of using deceptive advertising to market car title loans have agreed to consent orders governing their advertising, the FTC has announced (In the Matter of First American Title Lending of Georgia, LLC) FTC File No. 132 3264; In the Matter of Finance Select, Inc., FTC File No. 132 3262).

A car title loan, the FTC explained, is typically a high cost, short-term loan, secured with the consumer’s car title. While advertised as short-term loans, title loans can become longer-term, high cost installment loans with payments due over several months. The annual percentage rate of a car title loan can be over 300 percent. If a consumer does not repay the loan within 30 days, high finance charges can add up quickly, with a consumer paying hundreds or thousands of dollars in fees or forfeiting the vehicle.

The FTC charged that First American Title Lending and Finance Select (doing business as Fast Cash Title Pawn) both advertised zero percent finance offers, but failed to advertise the many conditions necessary to qualify for that rate (i.e., that the borrower had to be a new customer, repay the loan within 30 days, and pay with a money order or certified funds, not cash or a personal check). If a borrower failed to meet those conditions, the offer did not apply, and he would be required to pay a finance charge from the start of the loan. The company’s advertisements also failed to disclose the amount of the finance charge after the introductory period ended.

As part of the proposed settlements, the respondents are prohibited from failing to disclose all the qualifying terms associated with obtaining a loan at its advertised rate; failing to disclose what the finance charge would be after an introductory period ends; and misrepresenting any material terms of any loan agreements. In addition, First American Title Lending is also prohibited from stating the amount of any down payment, number of payments or periods of repayment, or the amount of any payment or finance charge without clearly and conspicuously stating all the terms required by the Truth in Lending Act and Regulation Z.

The consent orders are subject to a comment period expiring March 3, 2015, after which time the FTC will decide whether to make the proposed consent orders final.

Companies: First American Title Lending of Georgia, LLC; Finance Select, Inc.

News: Advertising ConsumerProtection FederalTradeCommissionNews