UPDATE: Checks have been issued as part of the settlement from Wisconsin Auto Title Loans Inc. If you were expecting payment but did not receive one, please see this story for a possible explanation and advice on what to do if you have any questions.
After a 10-year battle, state officials and the Legal Aid Society of Milwaukee said they had reached a preliminary $ 2.75 million deal with Wisconsin Auto Title Loans Inc.
If approved by a judge later this year, the deal will secure nearly $ 2 million in restitution for tens of thousands of customers the company allegedly tricked or forced to pay for “auto club membership.” “insurance type, which was marketed as optional. This is in addition to loans with already high interest rates of over 300%.
As part of the deal, Wisconsin Auto Title Loans is extinguishing all finance charges and fees accrued on its approximately 36,000 accounts, the Wisconsin attorney general’s office said in a press release on Monday. State officials estimate that this will amount to millions of dollars. Wisconsin Auto Title Loans will also release all existing liens on the vehicles of these borrowers.
Wisconsin Auto Title Loans is headquartered in Green Bay and operates 22 branches in Wisconsin. It provides short-term loans to vehicle owners by putting liens on their auto titles, usually for much less than the blue book value of cars, from $ 300 to $ 10,000.
Annual interest rates are above 300%. The loans were typically expected to be repaid within a month, but many borrowers were unable to repay the loans in full within a month, the complaint said. The loans are generally intended for people with very low income or bad credit history.
In addition to loans, Wisconsin Auto Title Loans has also enrolled customers in an insurance-type “car club” service, which reimburses the member for a small portion of the services in an emergency, such as $ 15 for a flat tire, $ 50 for breakdown service and $ 100 for legal costs in the event of an accident.
In some cases, company employees have claimed that optional membership is a one-time or compulsory right to obtain a loan. Most consumers did not pay the club fee up front, so the amount was added to their high-interest loan, officials said.
In one case, a consumer took out a loan of $ 700 and a seven-month club membership for $ 105. The interest on the loan was 360%, so for the first month the client paid $ 31.07 in interest alone, the complaint says.
“Although the product is supposed to be optional, consumers said they were not aware that they had purchased the product or that they had been told the product was a compulsory purchase with their title loan,” the office said. Attorney General. “In most cases, the additional cost was built into the total loan amount and became subject to the high interest rate attached to the loan.”
State law requires that all finance charges be disclosed in advance. They weren’t, meaning the interest rates given to customers were inaccurate, the state said.
“I am particularly pleased with the outcome of this case because people are already often in financial difficulty, and it is disturbing to see these people targeted by a deceptive scheme,” Attorney General JB Van Hollen said in a statement.
According to the press release, customers who purchased membership in the Continental Car Club service of Wisconsin Auto Title Loans between January 1, 1999 and December 31, 2010, will be eligible for a cash payment from a restitution fund. they paid as much, or more, than the money they received from the business when they took out the loan.
Wisconsin Auto Title Loans customers who may be eligible for a refund will be notified by letter on September 27, the state said.
Milwaukee County Circuit Judge Michael D. Goulee preliminary approved the settlement on September 6.
A judge has yet to make a final decision on whether or not to approve the settlement at a hearing scheduled for December 10. Consumers who do not want to be part of the settlement can either opt out or oppose it before that.
By September 27, state officials plan to create a website called www.titleloansettlement.com which will detail the terms of the settlement. Effective September 27, affected customers can also call (877) 435-4065 for more information on the terms of the settlement.
Wisconsin Auto Title Loans denies doing anything wrong or that customers were injured or “suffered actual damage,” according to the regulations.
“Nonetheless, the defendant has concluded that it is desirable and advantageous for the defendant that the action, including any claim for attorney’s fees, be settled to avoid the burden, expense, risk, inconvenience and loss. substantial distractions from continuing litigation, ”the settlement said. .
The case began in 2002 as a private class action lawsuit initiated by the Legal Aid Society of Milwaukee, which alleged that Wisconsin Auto Title Loans engaged in false, deceptive, deceptive and unreasonable behavior in selling contracts. compulsory “automobile club” service in connection with automobile title loans.
The state, including the Wisconsin Department of Financial Institutions and the Department of Agriculture, Commerce, and Consumer Protection, then stepped in to seek consumer restitution, penalties and other remedies under the laws. state laws on consumer protection.
The “arm’s length negotiations” between the company and the plaintiffs lasted more than a decade, according to the settlement.
As part of the settlement, Wisconsin Auto Title Loans would be prohibited from selling Continental Car Club memberships for two years after judgment day, which would result in a loss of revenue of more than $ 3 million for the company, the GA office said.
Wisconsin Auto Title Loans is owned by Community Loans of America.
For more consumer stories, visit the Public Investigator blog at jsonline.com/piblog.
Facebook: fb.me/GitteLaasbyPage
Twitter: @GitteLaasbyMJS
