When an obscure offshore usurious loan transaction surfaced in New York, Pennsylvania and Oregon, authorities took action, issuing hundreds of thousands of dollars in fines, filing cease and desist orders. and deciding to freeze the company’s bank accounts.
After nine complaints about the same unlicensed company were filed with Michigan Attorney General Bill Schuette, investigators closed six cases by sending a letter to the lender and marked the cases “cannot help.” They told another victim they couldn’t help and left two complaints open in June, according to documents obtained by The Detroit News through the Freedom of Information Act.
Even though Schuette’s office had a copy of a high-profile restraining order filed against the company by the Oregon attorney general, Schuette did not even issue a consumer alert.
“Other states have taken certain steps to deter these illegal lenders,” said Jessica AcMoody, senior policy specialist at the Michigan Community Economic Development Association. “In other states, attorneys general have said that if you illegally lend to someone in the state, they will not enforce collection, which has ended many illegal loans.”
Instead, consumers like Susan Collins of Ecorse are on their own.
Collins was unaware that title loans – whereby a borrower places a vehicle title as collateral – were illegal in Michigan when she borrowed from a small unlicensed lender operating in Oakland County. She knew it was a bad deal when she took out the loan. But she needed the money immediately.
“I had utilities about to shut down and I had to make it pay off really quickly,” Collins said.
She had found Michigan Securities Lending on the web. The company would loan him $ 800 against his paid 2008 Ford Fusion, the man said over the phone. She would pay $ 252 per month for six months, for a total of $ 1,512. In return, the lender would take title to the car and, if it missed a payment, they would take the vehicle and sell it. She arranged to meet the man at her brother’s house.
“They met me in Melvindale, took pictures of the car and gave me a check,” Collins says. “I never received a contract. You never go to an office; they still meet you and they still use out-of-state checks.
Collins made monthly payments on the loan, meeting with Title Loans owner Philip Andrew Locke at a White Castle restaurant on Telegraph Road in Redford. In June, Locke claimed Collins was behind on the loan, although she and her attorney said she paid on time, and told Collins she owed an additional $ 1,052 when the loan ended. pushing the effective annual rate beyond 581%. Later that month, his car was towed away.
“They took my car and I owed them nothing,” Collins said.
Title Loans of Michigan issues loans that involve consumers borrowing against their repaid cars and temporarily assigning title to the vehicle to the lender. Like the lending practice itself, the interest rate, which can exceed 250% on an annual basis, is illegal in Michigan. Securities loans are made without regard to the borrower’s ability to repay the loan, and the authorities view them as predatory and abusive.
Lenders do not disclose all terms and frequently hit borrowers with unexpected lump sum payments, even after victims have already paid thousands of dollars more than they borrowed. According to the Center for Responsible Lending, based in Durham, NC, borrowers renew old loans on average eight times, and 1 in 6 borrowers lose the vehicle when repossessed.
In addition to securities lending, another unlicensed lender also operates in Michigan under the names of Sovereign Lending Solutions, Title Loan America, Autoloans LLC and Car Loan LLC.
“Open survey files”
The Attorney General’s Office is Michigan’s primary consumer protection agency, but when it comes to businesses providing financial services, there’s also the Department of Insurance and Financial Services, which operates under the direction of Director Patrick McPharlin.
The office refused to publish the complaints despite a Freedom of Information Act request from The Detroit News, saying the records did not exist or that the records “are considered investigative documents and exempt” under the disclosure law.
The financial services agency released a summary indicating that a consumer complaint has been filed against Sovereign Lending Solutions, another against Sovereign Lending and Car Loans LLC, one against AutoLoans LLC and one against Title Loans of Michigan since March 2014. One manager added via email only that there were “open investigation files.”
Since 2014, Collins and four other borrowers who have filed complaints with the attorney general’s office said lenders were trying to repossess their cars or had already seized them.
The Secretary of State declined a request by The News to examine Michigan auto titles to see how many vehicle owners could be stranded with liens illegally issued by fraudulent title lenders. Representatives said they were technically unable to conduct such research.
Spokesmen for Schuette and McPharlin would not say what action was taken against the illegal lenders. They would also not make staff lawyers available for interviews.
The attorney general’s office has published copies of consumer complaints filed there, most marked “no jurisdiction.” Andrea Bitely, spokesperson for Schuette, said: “It doesn’t mean that no one has jurisdiction; this means that another body has jurisdiction. In this case, it would be the Department of Insurance and Financial Services.
In an email, Bitely added: “In a situation where a consumer believes they have been wronged by a business or other entity, we encourage them to contact our consumer protection division.”
That’s what Collins did, but in the end his only help came from Adam Taub, a Southfield consumer lawyer.
“The problem in Michigan is that people can commit fraud with impunity,” Taub said. “Consumer protection is an issue that the people who run our state don’t care about. “
The lender working as Car Loans LLC operates out of Rarotonga, part of the Cook Islands in the South Pacific, where business owners can remain anonymous. Car Loans avoids lawsuits and fines by operating over the Internet and through call centers, building and then shutting down websites, and working through mail forwarding services and virtual offices. When borrowers cannot pay, the lender uses independent repossession services to seize the cars and sell them at wholesale auction.
Other states intervene
But unlike Michigan, consumer protection officials in several other states have stepped in to try and stop them.
When Car Loans began repossessing cars in New York City, that state’s Attorney General Eric Schneiderman contacted state-approved repossession companies in April 2014 and made them agree to stop accepting. the work of the company.
After Pennsylvania discovered that more than 150 citizens had received illegal securities loans, the state’s Department of Banking and Securities issued a cease-and-desist order in June against Car Loans and his others. entities, as well as William McKibbin III, Kevin Cronin, Mark Edward Wiener and Kelly S. Bonner, the four men believed to be behind the company.
The department ordered Car Loans to issue refunds and fined the company $ 412,500 to $ 2,500 for each of the 161 Pennsylvania residents who were victimized.
In Oregon, Attorney General Ellen Blum went even further. His office estimates that consumers in Oregon pay at least $ 1 million a year for illegal title loans. Investigators searched the state’s auto registrations database and found more than 250 consumers with auto loans or one of its variants listed as title lien holders.
In response, the attorney general’s office filed an injunction against the company in September, then contacted all state pension services, telling them they were not allowed to take cars for the company. . The office also tracked some bank accounts Oregon borrowers sent their payments to.
“We were able to freeze a few of their accounts at several banks,” said Althea Cullen, assistant attorney general with the Oregon Department of Justice. “We’re trying to freeze these accounts, but the reality is they’re very sophisticated and they’ve probably moved all the money.”
To thwart collection attempts, Oregon sent a letter to every borrower identified through the title records, asking them to stop repaying the loans until a lawsuit has taken place, as they are illegal. With Car Loans cut off from hiring licensed pension companies and monitoring its checking accounts, state officials hope to curb the flow of money and cars out of their state.
Cullen said, “Once we see how many Oregonians were affected, and it was 250, you’ve got to do something about it.”
In Michigan, state officials have not issued an official consumer warning.
“I get a lot of calls for securities lending,” Taub said. “Often, people who are victims of these loans do not have time to make an appointment during cases to come and see a lawyer, because they will lose their jobs if they leave work. But if they are being abused or harassed, they should probably call a lawyer. Each of these loans that I have seen is a horrible loan.
Taub sued Title Loans of Michigan in Oakland circuit court in July, forcing the company to return Collins’ car and pay attorney fees. Collins picked up his car at the end of August. A finance bureau investigator called Collins in October. Despite Collins having made a formal complaint to Schuette’s office, neither she nor her lawyer have been contacted by these investigators.