DFPI takes action against car loan company
On December 14, the California Department of Financial Protection and Innovation (DFPI) issued a consent order with an auto title lender, resolving allegations that the company (defendant) violated the statute prohibition on fair access to credit to grant loans from $2,500 to less than $10,000. with interest rates above 36%. According to the consent order, the respondent was an established auto title lender who entered into an agreement with a Utah state chartered bank to provide the bank with marketing and servicing services in connection with auto title loans available to California consumers (Bank Loan Program) . The respondent and the bank began offering loans from the Bank Loan Program to California residents in January 2020. In the same month, the Fair Access to Credit Act amended California finance law to prohibit lenders approved to provide loans with principal amounts of $2,500 to less than $10,000 with interest rates above 36% plus the federal funds rate. The consent order stated that “certain loans made to California borrowers under the Bank Loan Program had principal amounts of $2,500 to less than $10,000 and were at interest rates greater than 36% plus the federal funds rate. The Commission served a subpoena requesting documents and information related to the bank loan program as it relates to California borrowers. After DFPI initiated the investigation, the Respondent ceased marketing Bank Loan Program loans under $10,000 to California borrowers.
Pursuant to the Consent Order, the Respondent agreed not to market automobile title loans under $10,000 with interest rates greater than 36% plus the federal funds rate under a program involving a state-chartered bank and not to service these loans until September 2023, unless there is an interim change in law or regulation that would otherwise allow it to do so.