RALEIGH, N.C. (WNCN) — When you buy a car, new or used, it’s a pretty expensive proposition. After you’ve taken the test drive and checked the vehicle’s mechanical suitability, you have to pay for it. Most of the time, that means getting an auto loan, but some loans are provided by companies that take advantage of people with poor or no credit, according to state officials.
These companies are called predatory lenders, and the North Carolina Attorney General is now going after these companies, who lure in those with poor credit, then charge excessively high interest rates.
“The rates they were charging were outrageous — in the hundreds of percent,” says state Attorney General Josh Stein.
Stein and his team recently shut down one company that both his office and the Better Business Bureau had received numerous complaints about.
The company operated under a variety of names, including Auto Loans LLC, Liquidation LLC, Car Loan LLC and Sovereign Lending Solutions LLC.
The BBB logged complaints about the company in several states, including North Carolina.
The attorney general’s office says the company solicited for business online, and customers would then have to send the company their vehicle title in order to secure the loan. If a customer failed to make a payment, the vehicle was repossessed.
“The loans made you give up your title in order to get the loan. That’s illegal,” said Stein.
The company did not hold a license to make loans in North Carolina and often failed to disclose all of the terms of their loans, which the attorney general says were excessive.
“We shut them down,” Stein said.
The state also took the company to court, where a judge cancelled and voided all previous loans. As part of the ruling, the defendants can never again engage in the loan business in North Carolina, and were fined $3.5 million in penalties.
According to the attorney general, the predatory lenders must also make restitution to the victims, and his office will now keep an eye on the people who were behind the company to make sure they pay up. If they don’t do it, he says, his office will take them back to court.
Email CBS North Carolina’s Steve Sbraccia if you have a consumer issue.