CARSON CITY — An auto title lender violated Nevada law with a loan program that overcharged customers with interest payments lasting twice as long as state law allows, the state Supreme Court ruled Thursday.
But the court’s unanimous ruling excused monetary damages against the company, TitleMax, on the grounds that it had reasonably interpreted the law and did not willfully seek to violate it.
The court’s decision partly reverses an earlier state District Court ruling, which itself tossed out an administrative law judge’s finding that voided more than 6,000 of the company’s loans and ordered refunds.
A spokeswoman for state Attorney General Aaron Ford said the office was “pleased with the court’s decision to shut down a potentially predatory lending program.”
TitleMax operates more than 1,000 offices in 16 states, offering high-interest loans to consumers with their vehicles as collateral. Nevada law limits the length of such loans to 210 days.
In 2014, TitleMax began to offer a loan program in Nevada that got around that limit with a “grace period” that initially charged lower interest-only payments for the first 210 days before switching to higher amortizing payments for the next 210 days.
Following inspections in 2014 and 2015 by the state Department of Business & Industry’s Financial Institutions Division of 42 company locations in Nevada, the state ordered TitleMax to stop the program on grounds that the deferred payment schedule amounted to a doubling of the permissible loan period with resulting higher interest charged to customers — in some cases up to 19 percent more.
TitleMax discontinued the program in December 2015. The following August an administrative law judge voided 6,140 earlier loans, fined the company and ordered it to refund principal and interest to affected customers.
The company appealed in District Court, and the decision was reversed, with sanctions against the company vacated. The Supreme Court’s ruling Thursday found that TitleMax’s offering was an “impermissible extension of its 210-day loan in violation of the plain language of (state law).”
But the high court sided with the District Court on lifting sanctions, finding that TitleMax’s actions in response to the 2014 inspections “tellingly demonstrate” it did not know the program violated state law and “took active steps to discern” if it did.