AG STOPS ONLINE AUTO TITLE LENDER FROM COLLECTING ON ILLEGAL LOANS MADE TO MASSACHUSETTS CONSUMERS

AG STOPS ONLINE AUTO TITLE LENDER FROM COLLECTING ON ILLEGAL LOANS MADE TO MASSACHUSETTS CONSUMERS

Liquidation, LLC Repossessed and Sold Motor Vehicles after Making Loans with Interest Rates As High As 619 percent

BOSTON – An unlicensed online auto title lender has been ordered to stop making and collecting on illegal, short-term loans made to Massachusetts consumers in an enforcement action filed by Attorney General Maura Healey.

The preliminary injunction, entered last week in Suffolk Superior Court against Liquidation, LLC (Liquidation), comes after AG Healey sued the company for allegedly targeting economically vulnerable Massachusetts consumers, providing them with unlawful, high-interest loans on their otherwise paid-off vehicles and, when they could not pay, seizing and selling their vehicles.

“We allege that this company preyed upon financially-strained consumers by offering quick cash in the form of illegal and predatory loans that the lender knew they could not pay back,” said AG Healey. “For many families, a vehicle is their most valuable household asset and is often necessary to maintain their livelihood. This order prevents the company from continuing to make or collect on these loans, some with interest rates higher than 600 percent. Our office will continue to go after companies that use abusive practices to reap illegal profit from consumers in Massachusetts.”

According to the AG’s complaint, filed in Suffolk Superior Court against Liquidation, also doing business as Auto Loans, LLC, Car Loan, LLC, and Sovereign Lending Solutions, LLC, the company routinely made and collected upon short-term loans containing undisclosed and deceptive terms, including illegal interest rates and abusive interest-only payment schedules that resulted in final balloon payments that exceeded the amount originally given to the consumer.  

A sample of loan agreements procured by the AG’s Office in its investigation revealed loans ranging from $700 to more than $9,000, with interest rates ranging from 181 percent to 619 percent—rates far in excess of state civil and criminal usury laws that limit interest on small loans of $6,000 or less to 12 percent and 20 percent for loans above the $6,000 threshold, respectively. More than 200 Massachusetts consumers statewide were victimized by this unlawful lending scheme.

The AG’s Office last week obtained a preliminary injunction against Liquidation, ordering the company and its agents to stop all collection activities on these illegal loans including the collection of illegal interest payments, motor vehicle repossessions, and auction sales. It also prohibits Liquidation from making any new loans to Massachusetts consumers and from moving or concealing assets prior to trial.

Most consumers applied for loans from Liquidation online or by calling a number listed on its website. The AG’s Office alleges that Liquidation and entities believed to be affiliated with it were not licensed to originate small loans in Massachusetts. It also alleges that Liquidation did not provide consumers with copies of their loan agreements and did not disclose a number of abusive contract terms such as high interest rates, a large lump sum final payment, and a requirement that any disputes be mediated in New Zealand.

Although consumers were led to believe that they would pay off their loans in one year, they were never informed that their final payment would be more than the amount originally borrowed. Many consumers were unable to come up with the unexpected final payments and were forced to extend their loan terms and continue paying the high interest rates or risk losing their vehicles. Liquidation also required consumers to install GPS tracking units in their vehicles to ensure regular loan repayment and for purposes of repossession.

When borrowers missed or were late on a payment, Liquidation allegedly attempted to collect on the debt through repeated harassing phone calls and e-mails. In numerous instances, Liquidation repossessed the consumers’ vehicles and sold them at auction houses in Massachusetts, with Liquidation retaining all proceeds. The AG’s complaint alleges that since 2012, Liquidation ordered the repossession of at least 78 motor vehicles registered in Massachusetts and sold at least 66 of them at auction, many for a price significantly exceeding the amount of the consumer’s outstanding lien. 

In order to perpetuate and conceal their alleged scheme and deceive consumers and regulators, Liquidation operated under several other fictitious business names and from virtual office spaces and post office boxes around the country. The company purports to have transferred all of its assets overseas and reorganized in the Cook Islands.

The AG’s Office has notified affected consumers about the preliminary injunction, informing them of its terms and their right to stop making payments on these unlawful loans. The injunction has also been distributed to the state Registry of Motor Vehicles and the auction houses and repossession companies that previously worked with Liquidation.

The Commonwealth’s complaint against Liquidation seeks to void the company’s unauthorized and illegal loans and discharge the liens recorded on the titles of the impacted Massachusetts motor vehicles. It also seeks injunctive relief, restitution for consumers for all unlawful interest payments, fees, and replacement costs for lost motor vehicles, as well as penalties, costs, and attorneys’ fees for violations of the state’s lender licensing, usury, and consumer protection laws.

The AG’s Office offers the following tips for people considering taking out a loan:

·         Be wary of any loan that originates solely online. Know your lender and where they are physically located.

·         Be skeptical of a promise of fast cash. These offers usually come with very high and illegal interest rates.

·         Know and understand what you are agreeing to, in writing, before you finalize any commitment. Always request and keep a copy for your records.

·         Payday and auto title lending are costly alternatives for short-term cash needs. Before considering a payday loan, consumers should explore other alternatives including:

o   Contacting your local bank or credit union for a short-term loan;

o   Asking your employer for an advance on your paycheck;

o   Finding out if you can delay paying a non-interest bill such as a utility bill and make payment arrangements with the utility company;

o   Asking your creditor for more time to pay your bills or for a modification to your terms;

o   Contacting an accredited consumer credit counseling agency in your area such as Consumer Credit Counseling Service at (800) 388-2227 or American Consumer Credit Counseling at (800) 769-3571. The counselor can advise you how to get out of debt and avoid predatory loans, or;

o   Obtaining a cash advance from a credit card.

·         Contact the Division of Banks to determine if a lender is licensed to do business in Massachusetts at their Consumer Hotline at 1-800-495-BANK (2265), ext. 501.

The AG’s Office continues to be active in this area and wants to hear from Massachusetts consumers who have information regarding unfair or deceptive lending. Consumers with tips or questions can call the Attorney General’s consumer hotline at 617-727-8400 or file a complaint with the office.

The matter is being handled by Assistant Attorneys General Francesca L. Miceli and Justin Lowe of Attorney General Healey’s Consumer Protection Division, with assistance from Investigator Anthony Crespi and Paralegal Virginia Aprahamian.