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COMMONWEALTH of VIRGINIA
Office of the Attorney General

Robert F. McDonnell
Attorney General  
900 East Main Street
Richmond, VA  23219
804-786-2071
804-371-8947 TDD

 

 
 

For Release: June 8, 2007
Contact: J. Tucker Martin or David Clementson
Email: tucker.martin@oag.state.va.us or dclementson@oag.state.va.us
Phone: 804-786-2071

McDonnell Announces Settlement with Title Loan Lenders

Loan Max, LoanSmart Agree to Make Refunds to Eligible Consumers

RICHMOND – Attorney General Bob McDonnell today announced a Settlement Agreement with Loan Max and LoanSmart (Loan Max) for violations of Virginia’s Consumer Finance Act. Loan Max makes loans to consumers in amounts generally below $2,500. The loans are secured by a motor vehicle title, which is left with Loan Max. The company has 36 locations in Virginia.

Speaking about the settlement, Attorney General McDonnell remarked “I am pleased we were able to reach a fair and reasonable agreement with Loan Max that will provide refunds and other relief to thousands of affected Virginians. The Office of the Attorney General is charged with representing Virginia’s consumers, and this is a positive development for many Virginians. We appreciate Loan Max’s cooperation throughout this investigation.”        

The alleged violations occurred from October 2004 through November 2005. During this time, Loan Max typically charged its borrowers loan fees and interest rates that exceeded the statutory limits. 

The Consumer Finance Act prohibits any lender from making any consumer loan and charging or receiving interest in excess of 12% per year without having obtained a consumer finance license from the State Corporation Commission. Lenders that are subject to and licensed under the Consumer Finance Act are allowed to charge and receive interest at a single annual rate of up to 36% for loans up to $2,500. 

The Settlement Agreement includes the following key terms for title loans made by Loan Max during the period in question:

  • Loan Max agrees to make refunds totaling $206,415 to 1,790 borrowers for cash advance fees paid on loans paid in full during the first two billing cycles. Loan Max will contact all Virginia consumers who are eligible for refund checks;  
  • Loan Max agrees not to collect deficiency amounts owed by almost 12,000 Virginia borrowers who obtained loans and later defaulted on those loans;
  • Loan Max agrees to pay $35,000 to reimburse the Commonwealth’s attorney’s fees; and
  • Loan Max agrees to pay $50,000 to be distributed by the Office of the Attorney General to nonprofit credit counseling agencies in Virginia. The following nonprofit agencies that provide such credit counseling and debt management services to Virginians each will receive $12,500: Alliance for Families & Children of Central Virginia, Child & Family Services of Eastern Virginia, Commonwealth Catholic Charities and Catholic Charities of Eastern Virginia.

Consumers who have questions about the settlement may contact the Loan Max customer satisfaction center at 1-800-324-4061.