D.C. Announces Settlement of Lawsuits

D.C. Attorney General Peter Nickles announced last week that the District has resolved lawsuits against two Northern Virginia automobile title lenders that have agreed to repay more than $1 million to hundreds of D.C. residents who lost their cars and were forced to pay thousands in interest for loans they took out against their vehicles.

The District filed suit against LoanMax and CashPoint in March after consumers complained that the firms were violating the District's Consumer Protection Procedures Act, charging interest rates of more than 300 percent, far exceeding the city's cap of 24 percent on loan interest rates. The borrowers signed over their car titles to the companies as collateral.

"These companies were charging annual interest rates of about 300 percent and taking the titles of people's automobile, and if somebody fell behind, they would auction off their cars," Nickles said in an interview. "You don't escape our laws . . . by simply hanging out in Virginia."

Nickles said more than 650 D.C. residents who obtained loans from Nov. 24, 2007, to this month will be eligible to receive hundreds of thousands of dollars in refunds under the terms of the settlement. One such person is a 67-year-old retiree who paid more than $2,000 because of interest payments on a $1,500 loan.

"That was the biggest rip-off. They took advantage of people with hardships," said the woman, who obtained a loan in July from CashPoint, an Alexandria-based firm. The woman, who asked that her name not be used, borrowed against her 2002 Toyota Avalon, which was worth more than $30,000 when she purchased it in 2002.

"When I took out the loan, I had to pay a $125 processing fee, then I had to pay $382.19 a month on the loan," she said. "I ended up paying $2,318.23 on a $1,500 loan. They begin calling me before the payments were due. I paid every month, and they still called me three or four times a month before the due date."

The car-title loans are similar to payday loans, which allow consumers to easily qualify for cash, but with expensive fees and exorbitant interest rates. In 2007 the D.C. Council passed a law capping the annual percentage rate of loans at 24 percent. As a result, most of the companies that offered the short-term loans closed their stores in the District.

Nickles said LoanMax and CashPoint aggressively recruited D.C. residents to go to their Northern Virginia offices.

Nickles said the settlement called for the firms to give full refunds to all D.C. residents who obtained loans from Nov. 24, 2007, to this month and to return vehicles that were repossessed. If a consumer's car has been sold at auction, the companies will refund the amount for which the vehicle was sold. The firms also have agreed to make a contribution to the city's consumer protection fund and to stop doing business in the District.

"I have to give them credit. Once they were informed about our car laws and how serious we were, they came and cooperated with my office," Nickles said.

Michael Lester, president of CashPoint, said in an interview: "There is no signed agreement. Mr. Nickles has put me in a very difficult position. We are cooperating, and they are working with us, but this caught us completely by surprise. They gave us no warning, and I am astounded."

Nickles said the city is prepared to go to court to enforce the settlement.

LoanMax officials did not return phone calls.

Information about the settlement can be found at http://www.consumer.dc.gov or by calling the city's consumer protection hotline at 202-442-9828.