"Car title loans," the Center for Responsible Lending explains, "are marketed as small emergency loans, but in reality these loans trap borrowers in a cycle of debt. A typical car title loan has a triple-digit annual interest rate, requires repayment within one month, and is made for much less than the value of the car."
The FTC has taken against two car title lenders for deceptive advertising. In administrative complaints, the FTC charged that lenders First American Title Lending of Georgia, LLC, and Finance Select, Inc. advertised zero percent interest rates for a 30-day car title loan without disclosing important loan conditions or the increased finance charge imposed after the introductory period ended, the FTC explained in its press release.
The FTC charged that First American Title Lending, which operates over 30 locations in Georgia, advertised a zero percent offer (in English and Spanish) and failed to disclose that the borrower had to meet specific conditions to receive that rate. 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 or she 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.
The FTC alleged Finance Select, doing business as Fast Cash Title Pawn, failed to disclose that unless a loan was paid in full in 30 days, the zero percent offer did not apply, and that a borrower would have to pay a finance charge for the initial 30 days of the loan in addition to any finance charges incurred going forward. Fast Cash, which has five locations across Georgia and two in Alabama, also failed to disclose how much the finance charge would cost a borrower after the 30-day introductory period was over.
Last July, The FTC cautioned consumers against using car title loans in a document called "Caution: Car Title Loans Can Leave You Stranded."