Feds Target Auto Title Lenders for Deceptive ‘Zero Percent’ Loans

Photo (cc) by Jo Naylor

An advertisement for a short-term, zero percent car title loan may be tempting. But federal regulators say car title lenders often use deceptive marketing to attract consumers. So that zero percent loan is probably far from what you’ll get.

In its first case against car title lenders, the Federal Trade Commission has reached settlements with two companies, requiring that they halt their use of misleading advertising to market their loans to consumers.

The FTC alleges that First American Title Lending of Georgia, LLC and Finance Select, Inc. advertised zero percent interest rates for 30-day car loans, but failed to disclose information about the loan conditions or the hefty finance charge that would be imposed after the introductory period on the loan ended.

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement:

This type of loan is risky for consumers because if they fail to pay, they could lose their car – an asset many of them can’t live without. Without proper disclosures, consumers can’t know what they’re getting, so when we see deceptive marketing of these loans we’re going to take action to stop it.

Similar to payday loans, a car title loan is a high-cost, short-term loan. Instead of securing the loan with a postdated check, consumers are required to hand over their car title as collateral.

Unfortunately, as with payday loans, car title loans can often become longer-term, locking borrowers into high interest payments with devastating financial consequences. The FTC said:

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 alleges that First American Title Lending, which has 30 locations, advertised a zero percent loan offer without disclosing the conditions the borrower must meet in order to lock in the zero percent.

“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,” the FTC said.

The offer didn’t apply to borrowers that didn’t meet the conditions, and then First American Title Lending would assess a finance charge, from the start of the loan. The company also failed to disclose the amount of the finance charge.

The FTC alleges that Finance Select, which operated as Fast Cash Title Pawn, didn’t tell borrowers that the loan had to be paid in 30 days or the zero percent offer was null and void, leaving the borrower to pay a finance charge. Again, this car title lender did not disclose the amount of the finance charge.

The companies are now required to disclose qualifying loan terms and potential finance charge fees.

What do you think of the FTC going after car title lenders that are intentionally misleading consumers? Share your comments below or on our Facebook page.

To learn more about risky loans in the marketplace, watch this Money Talks News video.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
5 Ways to Save at Dollar Tree
5 Ways to Save at Dollar Tree

Yes, it’s possible to pay less than a buck for items from a dollar store.

10 Things You Should Never Buy on Amazon
10 Things You Should Never Buy on Amazon

Just because you can purchase something on Amazon doesn’t mean that you should.

11 Home Upgrades With the Best Payback in 2020
11 Home Upgrades With the Best Payback in 2020

The home remodeling projects that deliver the best bang for the buck tend to have one thing in common.

13 Small Gadgets Under $20 That Make Life Better
13 Small Gadgets Under $20 That Make Life Better

These inexpensive electronics will make your day-to-day life a little easier — and happier.

The 5 States With the Worst Health Care for Retirees
The 5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Whether you resell it for a big profit or add it to your own wardrobe, this type of clothing is a hidden steal.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

Is This Treatable Condition Causing Your High Blood Pressure?
Is This Treatable Condition Causing Your High Blood Pressure?

Researchers say too many doctors are overlooking this potential source of hypertension.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

Taking a Multivitamin? Here’s Why You Should Reconsider
Taking a Multivitamin? Here’s Why You Should Reconsider

A new study has bad news for the millions of Americans who spend money on multivitamins.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

This Is America’s New Favorite Grocery Store
This Is America’s New Favorite Grocery Store

Consumers say a familiar name has become their go-to source of grocery items.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

Does Wearing 2 Masks Protect You Better From COVID-19?
Does Wearing 2 Masks Protect You Better From COVID-19?

A growing number of people are wearing two masks instead of just one. Should you join them?

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

10 Cars You Are Most Likely to Keep for 15 Years
10 Cars You Are Most Likely to Keep for 15 Years

The cars that owners hold onto the longest have one thing in common, a new study shows.

Prepare to Pay More for These 31 Drugs in 2021
Prepare to Pay More for These 31 Drugs in 2021

More than 700 prescription medications have seen price hikes so far this year. Here’s a look at the worst.

The 10 Golden Rules of Becoming a Millionaire
The 10 Golden Rules of Becoming a Millionaire

I’m a millionaire several times over. I got here the same way you can — by following these simple steps.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.