A proposed class action claims TitleMax of Delaware, Inc. charges loan customers triple-digit interest rates while attempting to skirt state usury statutes by inserting a Delaware choice of law clause in its loan agreements.
The plaintiff, a Pennsylvania resident, alleges TitleMax loaned him $7,751.39 at a 132.01 percent interest rate and has unlawfully threatened to repossess his vehicle unless he pays $33,452.71 in interest. Per the case, the annual percentage rate (APR) charged to the plaintiff well exceeds the rate allowed under Pennsylvania’s usury statute, which the suit asserts is “unwaivable.”
“The legal rate of interest for an unlicensed lender in Pennsylvania is only 6% per annum,” the lawsuit, filed in the Philadelphia County Court of Common Pleas, notes. “At the legal rate of interest, [the plaintiff] would owe a finance charge of only $986, but Titlemax is seeking to collect 36 times that amount.”
According to the suit, the Delaware choice of law clause, which specifies that Delaware law will be used to interpret the agreement, in the defendant’s loan agreements is unenforceable and cannot compel borrowers to pay usurious interest rates in excess of the rates allowable under Pennsylvania law.
TitleMax, the lawsuit alleges, “runs a sophisticated loan sharking operation” through which it offers small loans secured through borrowers’ vehicles. The loans, which carry triple-digit interest rates, are intended to “exploit borrowers with poor credit and a crushing need for cash,” the suit alleges, claiming TitleMax has acquired security interests in “many thousands of dollars of automotive collateral” in Pennsylvania.
According to the lawsuit, TitleMax has insisted that it can make borrowers waive the protection of Pennsylvania’s usury statute by requiring them to sign a loan agreement containing a Delaware choice of law clause. The suit argues, however, that such a clause is unenforceable given the Pennsylvania Loan Interest and Protection Law specifies that “[n]otwithstanding any other law, the provisions of this act may not be waived by any oral or written agreement executed by any person.”
The plaintiff claims in the case that he took out a loan with TitleMax for $7,751.39 in April 2021 after experiencing financial hardship due to the COVID-19 pandemic. The case says the loan, which is secured through a lien on the plaintiff’s 2020 Ford Fusion, is payable in 48 monthly installments of $858.42. According to the suit, the TitleMax loan officer who prepared the loan agreement on a computer did not give the plaintiff control of the computer so he could review the terms of the loan. The case alleges the plaintiff was not shown the annual percentage rate, finance charge, total payments or payment schedule before he accepted the agreement.
Per the lawsuit, the plaintiff’s monthly payments are higher than he can afford and the $33,452.71 in interest he purportedly owes is money he needs for basic necessities such as rent, food, clothing, healthcare, transportation and communication. The lawsuit says TitleMax will “come to Pennsylvania and repossess [the plaintiff’s] Vehicle if and when [he] defaults,” which will cause the man “substantial and irreparable injury” given he uses the car to get to work, per the suit.
The case looks to cover Pennsylvania citizens who may in the future enter into an agreement with TitleMax for a loan for personal, family or household purposes that is secured by the borrower’s automobile and has an interest rate of or greater than 30 percent APR.
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