Category: Collections


Car Title Loan Lenders Beware: Be Careful When Serving Active-Duty Service Members!

How to Start a Car Title Loan BusinessTitle loan lenders serving active-duty service members NO-NO!

“Department of Justice (DOJ) goes after car title loan lenders and city government for their repossession by tow truck vendors for towing, selling and auctioning active service member automobiles.”

Done right, a car title loan lender can make a lot of money. Done wrong, your title loan business can put you in a heap of pain! Want to avoid the pain? Learn “How to Start a Car Title Loan Business” here: Get Started.

Even city government can screw up when dealing with active-duty service members. A specific example? On June 22, 2015, Chief Petty Officer Hartzog’s military legal assistance attorney sent a letter to Pinky Tows that outlined the facts and applicable SCRA provisions and sought restitution of $22,889.95 for the value of the 1997 Chevrolet S-10 and for the tools and personal items that were stored in the motor vehicle.

The Service members Civil Relief Act (SCRA) requires a person, a car title loan company, city governments… having a lien on a vehicle owned by an active-duty service member to obtain a court order before enforcing a lien.  The DOJ’s complaint alleges that Honolulu and their tow truck general contractor violated the SCRA by towing vehicles belonging to three active-duty service members identified in a complaint and the subsequent disposition of these vehicles without court orders.  The settlement agreement states that a DOJ investigation – launched in response to information provided by military attorneys – revealed that between 2011 and 2016, the city of Honolulu auctioned 1,440 vehicles registered to individuals who identified themselves as service members on city forms during their motor vehicle registration process.

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1. This action is brought by the United States to enforce the provisions of the Service members Civil Relief Act (“SCRA”), 50 U.S.C. §§ 3901-4043, against the City and County of Honolulu, Hawaii (hereinafter “Honolulu”) and P M Autoworks, Inc. d/b/a All Island Automotive Towing (hereinafter “All Island Towing”) (collectively “the Defendants”) for illegally auctioning, selling, or otherwise disposing of the motor vehicles and personal effects of active-duty service members.

2. The purpose of the SCRA is to provide service members with protections against certain civil proceedings that could adversely affect their legal rights while they are in military
service. One of those protections is the requirement that a person holding a lien on the property or effects of an active-duty service member obtain a court order prior to enforcing the lien. The
court may stay the proceedings for a period of time or adjust the obligations to preserve the interests of all parties.

3. Neither Honolulu nor its contracted towing company, All Island Towing, determines whether the motor vehicles they auction, sell, or otherwise dispose of are owned by active-duty service members.

4. By failing to obtain court orders before auctioning, selling, or otherwise disposing of the motor vehicles and personal effects of protected service members, the Defendants prevented service members from obtaining a court’s review of whether the lien sales should be delayed or adjusted to account for their military service.

5. Since January 1, 2011, the Defendants have auctioned, sold, or otherwise disposed of the motor vehicles of 1,440 individuals who had identified themselves as active-duty service members during the motor vehicle registration process. The Defendants auctioned, sold, or otherwise disposed of these vehicles to satisfy liens without obtaining court orders.

6. Prior to January 1, 2011, Honolulu and/or its contracted and subcontracted towing companies auctioned, sold, or otherwise disposed of the motor vehicles of other active-duty service members to satisfy liens without obtaining court orders.

Here’s the details on one of the 3 cases – the DOJ filed on. Chief Petty Officer Hartzog and his 1997 Chevrolet S-10.

Neither Honolulu nor its current contracted towing company, All Island Towing, determines whether the motor vehicles they auction, sell, or otherwise dispose of are owned by active-duty service members.

Honolulu’s Lien Sale of CPO Hartzog’s 1997 Chevrolet S-10

At all times relevant to this complaint, CPO Hartzog’s motor vehicle was registered in Hawaii. During the motor vehicle registration process, CPO Hartzog completed a non-resident driver form which identified him as a servicemember and exempted him from paying certain state and county motor vehicle weight taxes on that basis.

30. In October 2014, CPO Hartzog was aboard a U.S. Navy ship being transported to his temporary duty station in East Asia. Without his permission, his roommate drove his 1997 Chevrolet S-10 and was subsequently arrested. The motor vehicle was towed by Pinky Tows, a subcontractor of All Island Towing.

31. In early November 2014, CPO Hartzog learned via Facebook that his truck had been towed. On November 5, 2014, he executed a power of attorney onboard the naval ship, designating a fellow chief petty officer as his agent. On the same date, he scanned and emailed the executed power of attorney to his agent in Honolulu.

32. On or about November 11, 2014, the agent took the document to Pinky Tows in an attempt to retrieve CPO Hartzog’s motor vehicle and his personal effects. Pinky Tows refused to accept the power of attorney or release the motor vehicle. Pinky Tows refused to allow the agent to remove valuable tools and personal items from the trunk of the motor vehicle because the agent was not the motor vehicle’s legal owner.

On December 3, 2014, Honolulu attempted to auction the motor vehicle and its contents, but they did not sell. Honolulu released the motor vehicle to All Island Towing, and All Island Towing subsequently disposed of the motor vehicle and its contents. Neither Honolulu nor All Island Towing obtained a court order prior to putting CPO Hartzog’s motor vehicle up for auction or before disposing of the motor vehicle.

34. On February 5, 2015, CPO Hartzog returned from deployment.

35. On June 22, 2015, CPO Hartzog’s military legal assistance attorney sent a letter to Pinky Tows that outlined the facts and applicable SCRA provisions and sought restitution of $22,889.95 for the value of the 1997 Chevrolet S-10 and for the tools and personal items that were stored in the motor vehicle.

36. Pinky Tows responded by letter on July 16, 2015, stating that it had only towed and stored CPO Hartzog’s truck, and that the truck was put up for auction by Honolulu and was scrapped by All Island Towing.

37. On August 12, 2015, the military legal assistance attorney sent a similar demand letter to Honolulu. Honolulu did not respond.

38. The Department of Defense’s Defense Manpower Data Center (“DMDC”) website shows that CPO Hartzog was an active-duty service member when his motor vehicle was towed, put up for auction, and subsequently scrapped. The DMDC is the central source for identifying, authenticating, and providing information on Department of Defense personnel, including verifying  service members’ active duty status.

Here’s a link to the rest of this Case:

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GPS Devices for Title Loan Lenders

Complaint alleges that title loan lender used GPS tracking devices without consumer’s knowledge or consent to conduct repossessions of vehicles.

Florida Attorney General Pam Bondi’s Office obtained a consent order to resolve a complaint filed against a Jacksonville car dealership and its president regarding the dealership’s misleading business and sales practices. The complaint alleges that Beach Blvd. Automotive used GPS tracking devices to track hundreds of purchased vehicles without consumer’s knowledge or consent to conduct unconscionable repossessions of vehicles. The defendants also allegedly created fake online profiles and, without consumer knowledge, used consumer data to post false positive comments online about the dealership.

Do not let this happen to you! All your car title loan contracts should contain a consumer acknowledgement of the GPS device your company installs; 10 point fonts at a minimum are recommended. Refer to our sample “GPS Consumer Disclosure” in  our “Car Title Loan Manual” for an example.

Additionally, our “Title Loan Manual” provides contact information for a multitude of GPS device vendors.

Car Title Loan ProfitsAccording to the Florida AG complaint, “Beach Blvd. Automotive, its exclusive financing arm, Beach Blvd. Auto Financing, and John O. King, Sr., attempted to collect non-existent debt from consumers and threatened to use force to repossess purchased vehicles. The defendants allegedly increased consumers’ monthly car payments by adding optional items to the sales transaction without proper disclosure to customers. On several occasions, the defendants did not honor a promised warranty and, in some instances, charged a $399 pre-delivery inspection fee for an inspection never conducted.”

“The agreed-upon consent order requires the defendants to modify business practices and provide more than $5 million in debt forgiveness to consumers. As part of the consent judgment, the defendants will also refrain from making reports to the credit reporting agencies for consumers whose accounts are covered under the consent order. The consent order provides that within 60 days of the order’s entry, the defendants will provide equitable monetary relief, such as debt forgiveness, with a value of more than $5.1 million to certain former and current customers with covered accounts. In addition, BBA will pay $2,500 in consumer redress relating to certain binder deposits made by consumers and will also pay more than $280,000 for attorneys’ fees and court costs.”

Need help starting a car title loan business? Begin here: “How to Start a Title Loan Business via a storefront or the Internet.”

Here’s a link to the Consent Order: Florida AG on Car Title Loan Complaint


Can a Car Title Lender Repossess a Car After One Missed Payment?

What’s a Car Title Loan? When Can the Lender Repo it?

So, the question is, can you repossess the car, truck, boat, motorcycle, RV, boat… when your borrower has failed to make their timely payment to you?

Answer? It depends. You must check with your state or province department of banking, department of financial institutions… whatever the appropriate regulator is for your geographic area.

For example, in California where we have store-fronts and offer Inerner loans, we can repo the collateral after the first missed payment.

Here’s the California law from the California Department of Business Oversight website:


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“The Finance Lenders Law does not prohibit a lender from repossessing a vehicle after a single missed payment. To determine whether the repossession of a vehicle is permissible under your loan, refer to the original loan/contract documents that you signed when the financing was obtained. In most cases, lenders are within their rights to repossess a vehicle when a payment is not made.”

What is a car title loan? Here’s the long-winded answer: What is a car title loan.


Arizona Car Title Loan Laws

Arizona Car Title Loan Laws

Arizona and Repossession Laws

Arizona car title loan law states that if you are in default (i.e. aren’t making your monthly payments), then the title loan lender can take possession of your car even if they don’t have a court order to do so – as long as they don’t “breach the peace”.1)A.R.S. § 47-9609

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The Arizona title loan lender statutes don’t define what it means to “breach the peace” but the general rule is that the creditor cannot utilize force or threats, cannot enter a debtor’s residence without consent, and cannot seize any property over the objection of the debtor.”2)Repossessions, National Consumer Law Center, 7th Ed..

Arizona courts have ruled that title loan lender repo agents cannot bring a police officer with them when they come to repossess the car, even if the police officer does nothing but stand there – and if they do it invalidates the repossession. 3)See Walker v. Walthall, 121 Ariz. 121, 124 (1978)

Other courts have held that the following actions “breach the peace”:

  • Grabbing keys from the debtor and twisting their wrist;
  • Pushing a door open and striking the debtor in the stomach;
  • Touching a resisting debtor to any extent;
  • Towing a car away while the debtor is inside it, despite their protests;
  • Running over the debtor’s foot with a car and flashing a gun;

Your Remedies for Unlawful Repossession in Arizona

So what happens if a title loan lender creditor doesn’t follow the law and breaches the peace while they are repossessing your vehicle?  First, repossession can be invalidated and you can get your car back.  Second, you can seek payment of damages based upon Arizona statute and the actual damages you incurred.

Is It a Crime in Arizona to Not Turn Over Your Car?

Yes but with caveats. It’s not unusual for title loan lenders in Arizona to think it’s ok for their repo agent to take a borrower’s car and told tell them if they didn’t turn the car over they could be charged with a felony and face jail time and fees.

It is true that Arizona has a law4)A.R.S. § 13-1813 that makes it a felony to unlawfully fail to turn over a car that is subject to a security interest but there are very specific requirements that must be met first before you could be charged with a crime:

  1. First, you must be at least ninety (90) days past due;
  2. Second, the bank, title loan lender (or other lender) has sent you written notice via certified mail return receipt, that you are ninety (90) days late in making a payment and are in default;
  3. You fail to get caught up on the payments within the next thirty (30) days.

Only if all three of these elements are met and then you fail to turn the vehicle over do you run the risk of having a felony charge. And be aware the Maricopa County Attorney’s Office rarely prosecutes these as crimes.

Title loan lender repo agents throw this statute around as if merely refusing to turn a car over results in a felony charge.


Car Title Loan Collections

Car Title Loan Collections

A new trend in car title loan and payday loan collections to track down debtors? Using social media such as FaceBook, Pinterest, Twitter, Instagram, etc. Payday loan and car title loan lenders are monitoring borrower’s social media accounts for clues as to a borrower’s ability to pay and where borrower’s are employed.

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Text messaging, email, “friending” are all becoming popular with car title loan and payday loan collectors today.

Consumers just don’t have a clue! They’re revealing all kinds of private information enabling car title loan and payday loan collectors to get their money. Even the IRS is at it according to media reports.

Whether laws are being broken to collect on these outstanding debts is open to debate. Federal Trade Commission regulations don’t explicitly refer to social media. The FTC did address how text messaging can and can’t be used to lawfully collect debts. Regardless, it’s unlawful for a bad debt collector to harass a debtor or violate a debtor’s privacy. This often happens when debt collectors reach out to the relatives and friends of a debtor.

Horror stories abound of car title loan lenders sending text messages and making phone calls during which the debt collectors failed to disclose that they were car title loan debt collectors, threatening to sue and garnish wages from the debtors they were contacting, and revealing individuals’ debts to friends, families, and coworkers.

If you’re a payday loan or car title loan lender in need of new ideas for collecting bad debt owed to you and you’re tried all the typical skip tracing methods, read our Title Loan Collections Chapter in our “How to Start a Car Title Loan Business Bible.”