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Letter From Our Reader | Car Title Loan Fraud And Government Corruption‏

I am writing to you in the hope that you will help me expose a serious case of corporate fraud and state government corruption. This situation centers on car title loans in the state of Florida. I think a brief history would be instructive and beneficial to understanding the current state of affairs.

Prior to the year 2000 car title loan in Florida were basically unregulated. The industry was fairly new to the state at that time and the term “title loan” was defined only in chapter 538 of Florida statutes. The problem was, that was all chapter 538 did was define what a title loan is. The chapter did not include any regulations on tile loans at all. So it was that title loan lenders were free to do just about anything they wanted to….and they did. It was like the wild west where title loans were concerned. For just one example, some title loan lenders were charging up to 300% interest and most were charging an average of 265%.

Eventually consumers began to complain (even then Governor Bob Butterworth made several less than complimentary statements about title loan lenders, once stating that title loan lenders were worse than loan sharks and on another occasion stating that title loan lenders made the mob look good) and as a result several municipalities began proposing ordinances which would place several restrictions on title loan lenders, including, but not limited to, a restriction limiting such lenders to charging a maximum of 30% interest. The title loan lenders fought back. At that time the title loan industry ad a lobby organization. This lobby had several legislators in their pocket (so to speak) because the lobby had contributed rather generously to these representatives election campaigns. So it was that these representatives proposed legislation that would prevent municipalities from enacting any ordinance(s) that would affect title loans in any way. Unfortunately for the title loan industry this plan backfired on them. The legislature as a whole was at that time more or less in the dark on the subject of title loans. But the proposed legislation brought the subject to the Legislatures FULL attention and that august body didn’t like what they saw. And so in the year 2000 the Legislature enacted chapter 537, the Florida Title Loan Act. This Act provided for very strict and very expensive licensing requirements as well as several very important consumer protections where title loans are concerned. In fact, the licensing requirements and consumer protections provided for in chapter 537 were completely anathema  to the title loan industry. And this fact was not lost on the two Florida state regulatory agencies that stood to lose literally millions of dollars in revenue annually because of the Florida Title Loan Act.

The Florida office of Financial Regulation (OFR) is the state agency responsible for regulating financial services companies including title loan lenders. It is important to note here that the function of the OFR is not to resolve individual consumer disputes with the financial service providers that the OFR regulates. Rather, the OFR’s function is to ensure that said financial services providers comply with the laws that pertain to their respective businesses. Thus, where title loan lenders (companies) are concerned, the OFR’s function and responsibility is to ensure that title loan lenders comply with the laws that regulate title loans so as to protect consumers from fraudulent business practices by such lenders. Unfortunately, the OFR has absolutely no interest in enforcing compliance with the law where title loan lenders are concerned, to the detriment of the consumers of the state of Florida, but to the benefit of the coffers of the state of Florida.

As previously stated, chapter 537 of Florida statutes, the Florida Title Loan Act provides for very strict and expensive licensing requirements as well as several significant consumer protections. As for said licensing requirements, the first thing an applicant for a chapter 537 license must do is pay a $200 non-refundable fee and submit a full set of fingerprints which the OFR must then forward to both the FDLE (Florida Department of Law Enforcement), and the FBI (Federal Bureau of Investigation), so that both agencies can conduct a thorough 10 year criminal background check on the applicant. If the applicant has had any conviction for any crime of fraud or moral turpitude during that ten year period, whether adjudication wa withheld or not, the application must be denied. This alone presented a serious problem for the OFR. Very few, if any of the people who owned and operated title loan companies prior to the enactment of chapter 537 would have passed such a criminal background check and therefore would not have qualified for a license under the Act. This then would have itself significantly reduced the number of title loan companies in this state.

Now, if an applicant passes the ten year criminal background check, the applicant must then pay the annual licensing fee of $625 dollars (said fee to be paid biennially). This licensing fee is not an issue. But what is an issue is the fact that the applicant must also post a $100,000 bond as well. And to make matters worse (for the applicant and by extension the OFR) is that this license only permits the title loan lender to conduct business at the single location listed on that license. If the lender wishes to expand his business and open a second location, he must obtain a second license which means paying the licensing fee again and posting another $100,000 bond. If he wants to open a third location, same thing, another license, license fee and another $100,000 bond. This applies up to ten licenses and a total aggregate of 1 million dollars in bonds. All licenses in excess of ten require only the payment of the $625 annual fee. The point here is, THAT’S A LOT OF MONEY IN BONDS. This is especially true when you view this monetary burden in conjunction with the consumer protections provided for in chapter 537

I will not in this writing go into great detail with regard to the consumer protections provided for in chapter 537. To do so would require me to type (and for you to have to read) what would amount to a tome of biblical proportions. Suffice it to say that that the consumer protections provided for in chapter 537, if enforced by the OFR, would make it quite literally virtually impossible for any person to make a profit as a title loan lender. I will happy to review these consumer protections with you should you require me to do so in the future. However, for the purposes of this writing and in the interest of some semblance of brevity I ask that you just assume for the moment that these consumer protections in chapter 537 simply are not consumer protections that favor title loan lenders at all.

In any event, you have to look at both the licensing requirements and the consumer protections in chapter 537 together to understand why chapter 537 is so incredibly bad for title loan lenders and makes it virtually impossible for title loan lenders to make a profit. Because the fact is, the OFR realized this fact and knew that if it enforced compliance with chapter 537 that would effectively be the end of the title loan industry in this state. And that in turn would mean literally millions of dollars in lost revenue annually to the state of Florida. You see, aside from the licensing fees paid by title loan lenders annually, the Florida Department of Highway Safety and Motor Vehicles (DMV) is the agency that actually collects the lions share of the annual revenue generated by title loans.

Every time a title loan lender makes a title loan to a consumer, the lender automatically and immediately places a lien on the consumers vehicle. This lien is recorded (illegally) by the DMV with an attendant $75 fee. This fee is initially paid by th lender but of course the lender then adds this fee to the balance due on the loan so that ultimately the consumer pays this fee. In 1999 there were approximately 750 title loan lenders doing business in Florida and in that year it is estimated that over 500,000 title loans were made to consumers. The math speaks for itself.

Here’s the point. Knowing that if they enforced compliance with chapter 537 there likely would not be any title loan companies in this state because no one would be stupid enough to go into the title loan business under chapter 537, the OFR, working with the DMV came up with a plan. First, the OFR would simply ignore chapter 537 in it’s entirety and start allowing title loan lenders to conduct business under chapter 516 the Florida Consumer Finance Act. That’s right, currently there is not a single title loan company in the state of Florida that is licensed under chapter 537. Every single title loan company in this state is licensed under chapter 516. So at present, title loan lenders are not title loan lenders at all. They are consumer finance companies that just happen to be title loan lenders.

But as soon as the OFR decided to ignore chapter 537 and started allowing title loan companies to operate under a chapter 516 license they realized that there were problems. First and foremost, at that time there was actually a provision of chapter 516, specifically s.516.02 which specifically stated that chapter 516 does not apply to title loans. So the OFR just treated this provision exactly the same way as they treated chapter 537, they simply ignored it. ( In an odd twist of fate, in 2006 the legislature amended s.516.02 and removed the sentence which stated that chapter 516 does not apply to title loans as being superfluous because chapter 537 made it perfectly clear that only chapter 537 licensees are authorized to make title loans).

In any event, there were additional problems and that’s where the DMV comes into the picture. First, chapter 516 does not contain a single provision that authorizes licensees to place a lien on a motor vehicle. In fact, the term “motor vehicle” does not appear even once in all of chapter 516. (In fact, currently the term “title loan” also does not appear even once in chapter 516). Thus, under chapter 516 licensees had no valid means for having a lien recorded on vehicles that serve as collateral for a title loan. So the DMV simply started to allow title loan lenders to use the standard DMV notice of lien form. Of course this form does not contain an area for the recording of a title loan lien but the DMV and OFR didn’t let such a pesky little detail deter them. The next problem was that if a borrower defaulted on a title loan resulting in the lender repossessing the borrowers vehicle, the lender then had no legal means under chapter 516 to transfer the title to such vehicle so that the lender could then legally sell the vehicle. Again, no problem. The DMV simply created a completely new, and completely illegal “non secure” power of attorney form just for chapter 516 title loan lenders exclusively to use.

So now title loan lenders, the OFR and the DMV had everything needed to allow title loan lenders to illegally engage in the title loan business under chapter 516. Except of course for the provision of chapter 516 that prohibirs licensees to take any confession of judgment or ANY power of attorney. See, the DMV notice of lien form constitutes a confession of judgment and of course a power of attorney, whether secure or not, is still in fact a power of attorney. This prvision by the way is s.516.16 and it states “No licensee shall take any confession of judgment or any power of attorney”. The OFR’s answer to this problem was simplicity itself. They just went ahead and ignored it. There seems to be a pattern here. In fact, the DMV also knows full well that it is illegal for chapter 516 licensees to take pwers of attorney from consumers but that agency also simply ignores this law and accepts these illegally obtained (fraudulent) power of attorney forms from chapter 516 licensees and actually transfers ownership (title) of consumers vehicles to the title loan lender based on these documents.

There is even more to this situation but this correspondence is now very long. Oh I should mention here that the Attorney General’s office is also involved in this corruption. I have filed 6 separate complaints about all of this with the AG’s office. That office refuses to take any action whatsoever. But get this, about a year and a half ago, befoe I filed my first complaint with the AG’s office, the Ag stated on her website that title loans in this state are regulated exclusively by chapter 516. But immediately after I filed my complaint, the AG changed her opinion and now states that title loans in this state are regulated by both chapter 516 and chapter 537. So the fact is, the AG changed her opinion on title loans based on my complaint. This demonstrates that the AG knows full well that what’s going on is fraud. But get this, like I said the AG now says that title loans are regulated by both chapter 516 and chapter 537 and the goes on to acknowledge that chapter 537 provides several significant consumer protections but says that title loan lenders can avoid these consumer protections by simply getting licensed under chapter 516. REALLY!! We’re taling about the AG of the state of Florida here. Since when does the Florida Legislature enact a chapter of law which includes several significant consumer protections just to have the AG decide that title loan lenders can circumvent those consumer protections by simply getting licensed under a different chapter of law? THAT’S RIDICULOUS!! And since when does the Legislature enact an entire chapter of law just to have the OFR totally ignore it?

This situation constitutes serious fraud and government corruption being committed by the OFR, DMV and the AG. It is costing the consumers of the state of Florida millions of dollars a year. And like I said, there is even more to this than I’ve related in this communication. But I’ll be more than happy to provide you with that information if you decide to help me expose this scam. I have been fighting this by myself for nearly three years now. I need help.

Thank you for taking the time to read this. I hope you will help me expose this situation. The OFR, DMV and AG are ALL supposed to be protecting consumers not ripping them off just to enrich themselves.

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