May 13, 2021
Like many Nevada residents, Las Vegas-resident Ray Diaz took out a loan from TitleMax lender to pay bills while unemployed during the pandemic.
But the high interest rate dried up his unemployment benefits and economic controls, resulting in a “carousel” of debt, he said. Diaz said he had previously borrowed from TitleMax and paid them back within four months, but this time he “extended” his contract through a process called refinancing, which resulted in interest rates rising further.
“I said, ‘Let’s go and pay some of the bills.’ But it made it worse and left me behind on other bills because I used the money I got to pay the principal and interest, “Diaz said The Nevada Independent. “It lowered my credit rating. It was a domino effect that really got me down.”
Diaz’s situation is the premise of the most recent case, which challenges the creative use of title loan refinancing to bypass the state-approved 210-day repayment period. On Wednesday, the Nevada Supreme Court heard oral arguments in the third case that has been appealed since 2016 Involvement of TitleMax and the Financial Institutions Division (FID) of the Nevada Department of Business and Industry, which regulates high yield lenders including TitleMax.
Nevada law allows companies to provide short-term, high-interest loans of various types to individuals, but has a generally strict period of 210 days to avoid massive interest piling. The law allows lenders to give Grace periods after the 210-day period has expired, but only under the conditions that a lender does not offer a new loan agreement or charges the customer additional interest.
Unlike the Dollar Loan Center or other well-known “payday lenders”, TitleMax offers what are known as title loans that are renewed after a person has exchanged the title of their vehicle for collateral. State law prohibits home loans exceeding the value of a car, but state regulators argued in court that the company’s “refinancing” practices were against the intent of the law.
“While (state law) expressly limits the term of a title loan to a maximum of 210 days and expressly prohibits the extension of this period under any name, the TitleMax loan product does not have a fixed end date for payment and extends the payment due date far beyond the original principal the 210-day limit … to ensure that TitleMax collects amortized interest for more than 210 days, “said Attorney General Heidi Parry Stern.
Attorney Dan Polsenberg, who represents TitleMax, told judges on Wednesday that refinancing is allowed on property loans because they are different from other loans that prohibit refinancing – namely because they hold the car as collateral. He argued that refinancing on payday loans and other high-interest loans is expressly prohibited and the lack of a similar ban on title loans is enough to make the practice possible.
“Because it’s different, an extension is just that – an extension of this loan. The attorney has indicated that all of these laws speak of repayment, renewal, refinancing and consolidation, ”Polsenberg said. “Well, surely the law recognizes that refinancing is not prohibited unless specifically prohibited. Refinancing … is using another loan to end this loan.”
TitleMax has been involved in two other Supreme Court appeals. In any event, TitleMax and the state have disagreed on the correct interpretation of Nevada’s title-granting laws. A recurring problem is limiting the length of time a titleholder can charge interest.
In one 2019 fall, the court unanimously decided that TitleMax had violated state law B. by offering a credit product with a “grace period” that went beyond the 210-day limit and required additional interest. But the court didn’t punish the lending company for ruling that TitleMax did not “willfully” violate state short-term loan law.
The first appeal process between the state and TitleMax resulted in Revocation and pre-trial detention to the lower court in October 2017 after the Supreme Court ruled that the District Court erred in its decision by dismissing TitleMax’s declaratory action. The case came after TitleMax was rated “needs improvement” by the FID and the lender then asked the district court to interpret the laws cited by FID in the assessment.
The Supreme Court did not issue an immediate ruling on Wednesday’s most recent case.
Meanwhile, Diaz said he had a decision to make this week. If he didn’t pay his $ 1,440 loan this month, he’d have to give TitleMax his car so he and his family would only have one vehicle. But his mortgage is $ 1,470.
“Chances are I can try to come up with this, but then it’s like an anchor around my neck for another six months [to continue paying the loan], and the indulgence ends at my home pretty soon, so I have a decision to make … Which is more important? Obviously the house would be, “he said.
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