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Judge OKs ban against illegal title lender

Brian J. O'Connor
Detroit News Finance Editor

An Ingham County Circuit judge approved on Wednesday a preliminary injunction that bars an offshore auto title lender from collecting on illegal loans bearing triple-digit interest rates made to Michigan consumers.

The Michigan Attorney General’s office already had issued a temporary restraining order against the company, Liquidation LLC, as well as several associated alias companies. Liquidation and its affiliates is based on a remote Pacific island. It issues loans over the Internet to consumers who pledge their paid-off cars and trucks, charging illegal interest rates of as much as 251 percent and frequently seizing borrower’s cars when they can’t pay.

Liquidation isn’t licensed to lend or do business in Michigan, where title loans and loans charging more than 25 percent annual interest are illegal. The attorney general’s office estimates that the cars of more than 60 Michigan borrowers have been repossessed by Liquidation and its spinoffs. Investigators said an estimated 334 Michigan consumers are now making payments on title loans to these companies.

In December, the attorney general’s office also announced that it has issued more than 1,000 cease-and-desist orders to Michigan businesses, warning them against cooperating with Liquidation LLC or its affiliates. The companies employ a network of websites, mail drops, payday lenders, banks, call centers and repo companies throughout the country to sign up borrowers, distribute checks, collect payments and seize the cars of borrowers who default on the abusive loans.

Title loans involve consumers borrowing against the value of their paid-off cars, often for less than half of the value. Consumer advocates despise the loans because, even in the 16 states where they’re legal, they’re made based on the value of the car but without considering the borrower’s ability to repay. Borrowers roll old loans into new ones an average of eight times, and 1 in 6 borrowers loses the vehicle to repossession, according to the Center for Responsible Lending, based in Durham, North Carolina.

“I’m pleased this case is moving swiftly and we look forward to working with the Secretary of State and the court to help consumers burdened with this debt to clear their vehicle titles,” Attorney General Bill Schuette said in a statement.

The injunction was approved by Ingham County Circuit Court Judge William Collette, who found “good cause” to believe that the companies were operating and acting illegally and that Michigan consumers were being harmed. In addition to collecting or acting on any loans made in the state, the order also bars Liquidation and its affiliates making or servicing any loan to any Michigan resident.

Liquidation’s related companies covered by the order include:

■Autoloans LLC

■Auto Loans LLC

■Car Loan LLC

■Sovereign Lending Solutions LLC

■Sovereign Lending LLC

■Management Solutions LLC

■Loan Servicing Solutions LLC

No one from Liquidation has responded to any letters or filings from Michigan or other states that have taken legal action against it, and there was no one in court today representing the firm, the attorney general’s office said.

If Liquidation and its owners continue to ignore the lawsuit, Schuette said he would ask the court for a default judgment, which would effectively cancel the loans and allow the borrowers to clear their vehicle titles from any liens Liquidation and its affiliates have filed.

Given how extensive Liquidation’s illegal lending has been in other states, there may be many more victims than the handful who’ve filed formal complaints and others identified by the attorney general’s investigation. The attorney general’s office encouraged victims to contact investigators. Consumers can reach the Consumer Protection Division at (877) 765-8388, at or by writing to Consumer Protection Division, P.O. Box 30213, Lansing, MI 48909.

The Department of Financial Services is continuing to investigate a second lender making unlicensed title loans, Title Loans of Michigan, she said. That company is run by Philip Andrew Locke, incorporated as PALS Financial Group LLC in Oakland County. One victim, Susan Collins, sued Title Loans in Oakland Circuit Court in July, forcing the company to return Collins’ car and pay attorney’s fees. Collins got her car back at the end of August.

In December 2104, some legal out-of-state auto title lenders attempted to insert a provision into the state pawnshop law to allow title loans in Michigan, but the measure died in the Legislature.

Liquidation LLC once operated out of Michigan under the name Sovereign Lending, incorporating in 2011 under Michigan’s Lac Vieu Desert Band of Lake Superior Chippewa Indians in the Upper Peninsula, hiding behind tribal immunity to charge annual interest rates of up to 390 percent. The tribe dissolved the company in 2014, when it transferred its assets to Car Loans LLC, headquartered in Rarotonga, a volcanic island that is part of the Cook Islands in the South Pacific where the principals behind a business can remain anonymous.

(313) 222-2145

Twitter: @BrianOCTweet