The Federal Trade Commission announced on January 30 that it has reached settlements with two auto title lenders operating in Georgia and Alabama.  The FTC had alleged that the lenders advertised certain offers without disclosing specific conditions required to receive the advertised rate, and failed to disclose that finance charges may rise after an introductory period.  The FTC alleged that some of the failures to disclose violated the FTC Act and that others violated the federal Truth in Lending Act.

Under the settlements, the lenders are required to disclose all the qualifying terms associated with obtaining a loan at its advertised rate and what the finance charge would be after an introductory period ends, and they are prohibited from misrepresenting any material terms of any loan agreements.  In addition, both lenders must submit to regular FTC examinations for five years of their advertising materials and other documents that would relate to their compliance with the settlement.

These settlements are an outgrowth of the FTC’s ongoing focus on the short-term lending and auto marketplaces, and they come on the heels of the FTC’s guidance, “Caution: Car Title Loans Can Leave You Stranded,” which encourages consumers to closely scrutinize auto title lending terms.  The auto title lending industry is likely to see more of these cases in the near future.