MARTINSBURG – West Virginia Attorney General Darrell McGraw said Thursday his office has filed a lawsuit against a “predatory” out-of-state title loan company in Jefferson County Circuit Court.
In a news release, McGraw said he filed the suit in an effort to protect residents from the “abusive and unlawful harassment and triple-digit interest rates” of Virginia-based Fast Auto Loans Inc., Georgia-based Community Loans of America Inc. and Robert I. Reich, the president and CEO of both corporations.
Their business consists of loaning money to people who own motor vehicles. The loan is secured by a lien on the borrower’s vehicle. These types of loans are often referred to as “title loans” — which are not authorized by state law, according to the Attorney General’s Office.
In his lawsuit, McGraw is asking for a permanent injunction preventing FAL from making unlawful threats of criminal prosecution and halting the company’s collection of excess charges, failure to follow the law in seizing consumers’ vehicles, extreme methods of coercion and other deceptive, unfair and illegal debt collection practices.
The attorney general’s suit charges that FAL violated several state consumer protection laws and asks for civil penalties as well as restitution and refunds for consumers.
“Out-of-state lenders collecting debts in West Virginia will respect the rights of our citizens and the laws of our state or they will face the consequences,” McGraw said during a press conference held at his Eastern Panhandle office in Martinsburg Thursday.
Victims of FAL’s collection tactics joined the attorney general at the press conference.
“Fast Auto Loans has put hundreds of liens on vehicles owned by consumers from Princeton to Martinsburg, in 24 West Virginia counties,” McGraw continued. “Unfortunately, many desperate folks obtained a title loan from the company as a stopgap measure only to find that they had compounded their financial troubles.”
This isn’t the first time the Attorney General’s Office has sought action against FAL, CLA and Reich.
In response to complaints from residents about the title loan company’s collection calls, McGraw issued an administrative subpoena duces tecum to FAL and CLA in March 2011, seeking disclosure of documents regarding loans made to West Virginians.
FAL and CLA, along with Reich, indicated it was their position that they were under no obligation to produce the documents requested by the attorney general in the subpoena.
In response, McGraw filed an action seeking enforcement of the subpoena duces tecum in Kanawha County Circuit Court.
However, Judge Charles E. King Jr. ruled in April 2011 that the subpoena was “procedurally defective” and therefore invalid, and denied McGraw’s request for its enforcement.
The attorney general did not file a direct appeal to the West Virginia Supreme Court of Appeals from the Aug. 15, 2011 order. Instead, on Dec. 5, 2011, he filed a petition for writ of prohibition.
In its per curiam opinion filed Tuesday, the state’s high court said because McGraw had “another adequate remedy,” it was forced to deny the requested writ.
“The writ of prohibition is truly an extraordinary remedy, one which should be reserved for extraordinary cases,” the justices wrote.
In this case, a direct appeal would have been the “more appropriate” remedy to address the perceived error in King’s order, the Court said, adding that a writ of prohibition is not a “substitute” for an appeal.
In McGraw’s newest action against the company, he alleges FAL charged 300 percent interest on loans made against car titles, “repeatedly harassed and abused” state consumers, their families and friends to try to collect debts, made false threats of arrests and criminal prosecution, and went as far as confiscating cars without court orders.
In fact, some victims’ vehicles were seized even though the amount owed — as little as $100 — was a fraction of the car’s value, the attorney general said.
According to McGraw’s suit, the bulk of FAL’s victims reside in Berkeley, Hampshire, Jefferson, Mercer and McDowell counties, which are close to the debt collector’s branch offices across the border in Winchester and Wytheville, Va.