Wis. reaches $2.75m settlement over title loans

Wis. DOJ reaches $2.75 million settlement with auto-title loan company over misleading conduct

Associated Press

MILWAUKEE (AP) -- An auto-title loan company agreed to pay nearly $3 million and terminate thousands of liens to settle allegations it engaged in false and misleading conduct, the state Department of Justice said Monday.

Wisconsin Auto Title Loans Inc. sells auto-title loans, which are high-interest loans of up to $10,000 secured by vehicle titles. The Green Bay-based company was accused of misleading customers by also selling them an optional club service that they either thought was mandatory or didn't realize they were buying.

The company was initially sued as part of a class-action lawsuit brought by the Legal Aid Society of Milwaukee. The Wisconsin Department of Justice joined the lawsuit by seeking restitution for customers and penalties against the company.

The company will pay $2.75 million into a restitution fund, under a settlement to which a judge gave preliminary approval earlier this month. The firm will also extinguish all finance charges that have accrued on all 36,000 open accounts and release all existing liens issued between 1999 and 2010.

The settlement agreement said the company settled to avoid litigation costs, and that it denies the validity of the allegations against it. The company's attorney, Kenneth Nowakowski, declined to comment further Monday.

The next step is a Dec. 10 hearing, when the judge will decide whether to formally approve the deal. Members of the class-action suit will have an opportunity to opt out or object to the settlement.

Wisconsin Auto Title Loans charged as much as 300 percent interest on loans worth between $300 and $10,000. As part of the transaction, borrowers — who were usually low-income people with poor credit histories — had to secure the deal with their vehicle titles, prosecutors said.

The parent company of Wisconsin Auto Title Loans had a separate contract with Continental Car Club Inc., to sell memberships to the motor-club service. Wisconsin Auto Title Loans would often add the fee for the club service to the cost of the overall loan, and apply the 300 percent interest rate to that amount as well, the criminal complaint said.

Prosecutors said "a significant portion of consumers" who bought the club service weren't aware they were buying it. Other borrowers said they were told by Wisconsin Auto Title Loans employees the club service was a mandatory condition of receiving the loan.

The complaint described one consumer who took out a $700 loan and paid an additional $105 for a 7-month Continental Car Club membership. She paid off the loan within 10 days, but when she took out another $700 loan the following month she was sold another $105 club membership, even though she already had one.

"Those few consumers who received benefits from CCC have paid CCC far more than the amount of benefits they received," the complaint said.

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Associated Press writer Todd Richmond in Madison, Wis., contributed to this report.

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Dinesh Ramde can be reached at dramde@ap.org.

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