Marlin Financial, a Florida-based lender that offers auto equity loans as a “great alternative to title loans,” is being investigated for consumer protection violations by the Florida Attorney General’s office.
The investigation was sparked by a Tampa Bay Times story unearthing a pattern of consumers claiming they were charged interest rates that exceed the state maximums and were effectively forced to agree to debt cancellation products that, in Marlin Financial’s case, were priced at $25,000.
Debt cancellation promises to eliminate the remaining debt owed on a vehicle in the event of the borrower’s death or will cancel monthly payments if the borrower becomes disabled, unemployed, or suffers some other specified hardship, according to the Consumer Financial Protection Bureau.
At least a dozen lawsuits filed in Florida cite the debt cancellation product as the crux of the complaints. Consumers who sought an auto loan online were given the state-required disclosure to accept or decline the debt cancellation product. However, when applicants selected decline, the application would shut down, and they would be forced to start the process over again.
Marlin Financial is offering equity loans, which is like title lending except the consumer does not need to have the car paid off in full to get the cash infusion they are seeking. Title loans can give consumers a larger loan amount, but equity loans are smaller because they are based on the difference between the value of the car and what the borrower hasn’t paid off yet.
In effect, equity loans can cause paying auto borrowers to fall into charge-off buckets if interest rates are too high.
For example, The Tampa Bay Times details a lawsuit filed by Isaiah Burgman, who was seeking a $10,000 loan backed by the Jaguar he had purchased. However, after feeling forced to agree to a $25,000 debt cancellation policy, his total debt ballooned to $35,000. He eventually defaulted on his payments and the vehicle was repossessed allegedly without an opportunity to collect his possessions from the car.
The Florida Office of Financial Regulation, which licenses lenders, told the Times it received 12 complaints against the company in the past four years. Meanwhile, The Florida Attorney General’s office received 19, and the Better Business Bureau recorded 32 claims against the company.
