The Attorney General of Pennsylvania has announced a settlement with a national auto title lending company that will see it pay $2 million back to consumers in the form of restitution and cancel nearly $4 million of existing loans, after it was accused of making loans to residents of the state that had interest rates exceeding 300%.
The Background: Pennsylvania caps the interest rate on auto title loans at 25%. But Community Loans of America, which made thousands of loans to residents of the state, thought it could skirt the laws because most of the loans were made from locations in Delaware, according to the AG’s office.
- The company also purchased leads from third parties that claimed to have offices in Pennsylvania. The AG’s office uncovered the fake location by running web searches for “Car Title Loan Philadelphia.”
- Even though the loans were made in Delaware, because the individuals in question were from Pennsylvania and vehicles were repossessed from Pennsylvania, Pennsylvania law applies.
- As well, the liens that were filed were filed with the Pennsylvania Department of Transportation.
- It was only after the Court of Appeals for the Third Circuit issued a ruling in 2022 which said that applying Pennsylvania usury laws to title loans made to Pennsylvania residents outside of Pennsylvania did not violate the Commerce Claus of the U.S. Constitution that the company realized it had a problem on its hands. It stopped issuing new loans to Pennsylvania residents two weeks later and in January 2023 stopped all collections on loans issued to Pennsylvania residents.
The Last Word: “This predatory lender targeted Pennsylvanians, thinking it could skirt the law with astronomical interest rates because it was based out of state,” Attorney General Michelle Henry said. “My office has now obtained several million dollars for Pennsylvanians who were ripped off by out-of-state car title lenders. My message is clear: we do not care where you are located. If you exploit Pennsylvanians, you will answer for it.”
