TitleMax Facing Military Lending Act Lawsuit Over Alleged High-Interest Title Loans

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A proposed class action claims TitleMax has issued thousands of illegal high-interest title loans to active-duty military service members and their dependents.

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The 39-page TitleMax lawsuit alleges that the defendant and parent company TMX Finance have violated the Military Lending Act (MLA), a federal law passed in 2006 to protect service members and their families from unfair, deceptive and excessively priced loans. Under the MLA, covered borrowers are entitled to certain protections when applying for several types of loans, such as a 36-percent interest rate cap and special statutory disclosures.

The plaintiff, a Georgia resident whose spouse is in the U.S. Army, claims TitleMax extended to her two title pawn loans with several loan terms prohibited by the MLA. A title loan is a type of loan for which a borrower uses their vehicle title as collateral. These loans are typically short-term and high-interest, and the lender can repossess the borrower’s car if they fail to make payments.

The plaintiff says that when she visited the defendants’ Cartersville, Georgia location in September 2021, she submitted a credit application that TitleMax soon rejected, stating that the woman’s status as a “military covered borrower” made her ineligible for the loan. The filing notes that the MLA “altogether” prohibits lenders from issuing title loans to those covered by the law.

“Following its denial of [the plaintiff’s] credit application, TMX’s representative walked outside for several minutes,” the suit shares. “Shortly thereafter, TMX’s representative returned and explained to [the plaintiff] that ordinarily TMX was unable to offer title loans to military families but would make an exception for her.”

The complaint contends that the plaintiff’s experience with the defendants was “not unique” but part of a “systematic nationwide scheme” to extend title pawn loans to individuals they know are ineligible under the MLA.

Per the case, the plaintiff received a $2,518 vehicle title loan from TitleMax in September 2021, followed by a second loan of $1,318 in July 2022. The filing alleges that both loans had interest rates of over 100 percent—far higher than the 36 percent cap set by the MLA.

“[The plaintiff] was not aware that the MLA applied to her loans because she did not receive any MLA disclosures,” the complaint says. “Had [the plaintiff] been made aware of the MLA and its limits she would not have entered into the defendants’ loans.”

The suit claims that TitleMax, in further violation of federal law, refinanced the plaintiff’s loans at least 14 times. The loan agreements also unlawfully required the woman to waive her right to file a class action lawsuit or have a jury trial, consent to binding arbitration, and provide her vehicle title as security, the filing claims.

On February 23, 2023, TMX entered into a consent order with the Consumer Financial Protection Bureau (CFPB) that outlines several of the company’s alleged violations of state and federal law, the case relays. According to the order, TitleMax made 2,670 prohibited loans to covered borrowers between October 3, 2016 and September 17, 2021 due to “intentional misconduct, a lack of internal and system controls, and no meaningful monitoring or oversight.”

The CFPB ordered TitleMax to “stop its unlawful activities,” provide $5.05 million in consumer redress and pay a $10 million penalty.

“This Class Action seeks to fill the void left by the CFPB Consent Order by obtaining actual damages incurred by the class, including but not less than $500 for each violation,” the complaint says.

The lawsuit looks to represent anyone in the United States who’s covered by the MLA and was issued a title loan from TitleMax similar to the plaintiff’s within the past five years.

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