A Highland Village law firm filed a class-action lawsuit in Denton County’s 362nd District Court this week, claiming that Title Max of Texas kept its customers in the dark about the actual cost of borrowing against the title to their vehicles.
Christman Kelley & Clarke PC filed the suit on behalf of Denton County residents Kimberly Babb, Jose and Linda Casarez, Jennie Reed and Tammy Venable, who represent a class that could number more than 1,000 people, according to court documents. In the lawsuit, they claim the company did not provide financial disclosures as required by state law and used illegal and deceptive trade practices.
The lawsuit seeks more than $1 million in damages.
Drew Christman, an attorney representing the individuals in the lawsuit, said the law firm has retained clients who are suffering at the hands of Title Max of Texas.
“We started to understand that this is a broad problem that has an impact on the community at large,” Christman said. “It is a social injustice that is being perpetuated to middle- to lower-income families who need a loan. They think they are getting one thing, but they are getting another.”
Title Max did not return multiple calls for comment.
The move comes after the Texas Legislature failed to pass any meaningful reform for credit-access businesses, as they are known to financial regulators, during its regular session. Advocates for reform have called for an interim legislative committee to address the issue.
In the meantime, some Texas cities, including Denton, have adopted ordinances that restrict what the credit-access businesses can do inside the cities’ corporate limits. The Consumer Service Alliance of Texas filed suit against Denton’s new ordinance on April 5, seeking a temporary injunction against its enforcement but, to date, no hearing has been scheduled on the matter.
Other class-action lawsuits have been filed against short-term lenders for violating usury laws in recent years, with public attorneys and nonprofit advocacy groups representing thousands of consumers in those cases.
The North Carolina Justice Center sued several payday lenders in that state, and settled with one in 2010 for one of the largest reported settlements at that time, $18.75 million for 140,000 consumers in Kucan vs. Advance America.
The San Francisco city attorney sued Money Mart on behalf of consumers who took out “Cash ’til Payday” or installment loans from 2005 to 2007. The case, Dennis Herrera vs. Check ’N’ Go of California Inc., was settled for $7.5 million.
In Colorado, the state attorney general secured settlements from two lenders, Payday Everyday of Colorado Inc. and Security Finance Corp., for predatory lending practices affecting about 2,900 consumers.
Recently, large banks also have begun offering short-term loans, and at least one class-action lawsuit soon followed in Ohio.
In William R. Klopfenstein and Adam McKinney vs. Fifth Third Bank, the plaintiffs claim that the state-chartered bank charged illegal interest rates. The lawsuit was filed in August 2012 in the U.S. District Court for the Northern District of Ohio. Ohio law limits banks to 25 percent maximum interest annually, but the plaintiffs claimed to have paid more than 1,000 percent annually.
Kenton Brice, another attorney with Christman Kelley & Clarke, said some lawsuits against title lenders have been settled in private arbitration, usually because the amounts in question are small. As a result, not many people learn about them.
But Brice said he believes this is first class-action lawsuit filed against Title Max of Texas in the greater Dallas-Fort Worth area.
KARINA RAMIREZ can be reached at 940-566-6878 and via Twitter at @KarinaFRamirez.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.