About 23,000 borrowers of Wisconsin Auto Title Loans, Inc. are expected to receive refund in mid-February this year as part of the $2.75-million settlement for charges of lending malpractice.
Wisconsin Auto Title Loans was alleged to have forced or tricked their consumers into paying a so-called membership fee of $30 to $150, depending on the loan amount, in Continental Car Club, an insurance-like service. By being a member, the borrower can be reimbursed a small amount for emergency services like towing.
The membership was offered as an option. But prosecutors said the loan officers sometimes presented it as mandatory in order to get approved for the loan.
There were also some borrowers who did not know they actually purchased the membership. Apparently, the fee was secretly tacked onto the interest rate, making it so high.
Consumers who took out a loan from Wisconsin Auto Title Loans from January 1, 1999 to December 31, 2010 and confirmed their address by November 15 last year are eligible for the refund which is equivalent to or greater than the loan amount they received from the company. They can receive up to 125 percent of the membership fee they paid plus interest.
But a lot of consumers were infuriated by the exorbitant interest rates charged them and “don’t understand that the settlement only applies to the membership fees,” said litigation director Peter Koneazny of the Legal Aid Society of Milwaukee which represents the borrowers.
The auto title loans, which are typically 30-day long, were made with the borrower’s car undervalued and an annual interest rate of over 300 percent. These are not covered in the settlement. Even with the refund, borrowers will still pay off their loans.
The Wisconsin Department of Justice and the Legal Aid Society of Milwaukee announced the settlement last September, ending the ten-year clash with Wisconsin Auto Title Loans.