Giant title loan companies argue they are people too

Introduction

Though they operate thousands of branches across the country, the nation’s three biggest auto title lenders want Virginia officials to treat them as private citizens and afford them the same right to keep their financial records out of public view.

The three lenders — TitleMax of Virginia Inc.; Anderson Financial Services LLC, doing business as Loan Max; and Fast Auto Loans Inc. — have filed legal arguments asking Virginia officials to prevent financial reports they submitted to the state from being disclosed to the Center for Public Integrity.

The annual reports include detailed sales figures, volume of loans, interest rates, the number of cars repossessed when borrowers default, and how often the lenders get into trouble with state and federal regulators. TitleMax, Loan Max and Fast Auto Loans submitted heavily redacted reports last month at the request of the commission before its hearing.

In defending the redacted reports, the companies argued in their latest filings that the reports constitute “personal financial information” that should be exempt from disclosure, just as it would be for any person.

“Fast Auto’s personal financial information should be treated as confidential just as an individual’s personal financial information would be treated,” the company wrote in its filing submitted Friday.

At a Jan. 27 hearing in Richmond, the Virginia State Corporation Commission, which oversees financial institutions in the state, called for more legal argument. At issue is whether the reports should be made public, as the commission’s own staff recommended last year, or if the information should be withheld from the public. Much of the debate at the hearing centered on whether the lenders should enjoy the same privacy rights for financial records as a private individual would under the law.

Attorney Erin Witte, who represented the Center for Public Integrity, argued that state financial privacy laws are meant to protect consumers, not major lending firms. The title lenders “are national corporations who are subject to tight regulations in accordance with the type of business they conduct; loaning money at triple digit interest rates to consumers at the fringes of society who often have no other financial means or option,” she wrote.

The commission’s Bureau of Financial Institutions, the regulatory division of the Virginia State Corporation Commission, agreed that companies aren’t people when it comes to shielding their finances. For 25 years the bureau “has steadfastly construed personal financial information as being limited to financial information relating to individuals,” the bureau wrote in its filing. The bureau said there is no “legal basis” for keeping the reports confidential, and they should be released.

In its brief, TitleMax noted the reports contain what it called “trade secrets,” whose release could cause the company “irreparable damage.” LoanMax called for a change in state law or an administrative rule process before a decision is made.

The Center for Public Integrity requested the annual reports from Virginia officials in November as part of an investigation into the costs of title loans nationwide. In Virginia, where nearly 500 title loan shops are operating, average interest rates were 222 percent in 2014, according to aggregate state figures.

Title lenders don’t deny interest rates they charge are steep. But the companies say they provide a vital service to people denied credit by banks.

Critics argue that title loans exploit low-income people and should be banned, or at least strictly regulated, to keep interest rates manageable. That argument has made little headway in the Virginia General Assembly, which earlier this year killed several bills to tighten industry oversight, including one bill that would have capped interest rates at 36 percent.

One bill that failed would have directed state officials to assess title loan profit margins and study whether allowable interest rates should be scaled back.

The House Joint Resolution sponsored by Del. Mark D. Sickles, a Fairfax Democrat, argued that the General Assembly “does not have access to data that would enable it to consider whether the costs of such loans are excessive or unreasonable.”

Witte said that releasing the annual reports could help regulators get a handle on how the businesses operate.

“Scrutiny into these businesses is appropriate and in fact necessary to ensure that they do not take further advantage of Virginia’s most vulnerable consumers,” Witte wrote.

It’s legal in about half the states to pledge a car title as collateral for a loan. Some states impose caps on interest rates they charge, while in other areas borrowers can pay 300 percent or more for small loans.

Getting a complete picture of the full costs of title loans — both in fees paid and vehicles lost — can be challenging. Regulators in many states either don’t require lenders to file detailed financial figures, including interest and default rates, or they keep the information confidential. Yet in Missouri, where all three of the Virginia title lenders also operate, annual financial reports are public records and anyone can request copies.