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DFPI Reaches Agreement to End High-Interest Rate Loans Marketed by LoanMart for 21 Months

DFPI Reaches Agreement to End High-Interest Rate Loans Marketed by LoanMart for 21 Months
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The Los Angeles-based company agrees not to market or service loans-for-property at rates higher than permitted under California law for fair credit access.

Sacramento – The California Department of Financial Protection and Innovation (DFPI) announced today that it has entered into a new approval order with Wheels Financial Group, Inc. based in Los Angeles, doing business as LoanMart, which prohibits the company from marketing or servicing auto ownership loans of less than $10,000 at rates over 36 percent in California for the next 21 months.

The agreement follows an investigation launched last year by the administration to assess whether the company was evading setting a new interest rate cap in California through a partnership with an out-of-state bank. LoanMart stopped marketing the high-interest loan in November 2020 while a DFPI investigation into its partnership with Utah-based Capital Community Bank was pending.

DFPI Commissioner Clotheld F. Hewlett: “The DFPI is committed to ensuring that out-of-state banks do not take advantage of Californians.” “The DFPI will continue to combat any effort to evade the California Fair Credit Access Act and will work closely with state and federal regulators to monitor and respond to practices that harm consumers.”

In 2019, the California legislature passed the Fair Credit Access Act (AB 539), which set interest rates on most loans made by state-licensed lenders at around 36 percent. These interest rate caps became effective on January 1, 2020. The DFPI licenses and regulates lenders subject to the California Fair Credit Access Act and the California Finance Act, the law that provides the authority through which LoanMart has made loans in California. The agreement states that LoanMart may not make loans available through a state-approved partner bank until September 2023 unless there is an intervening change in law or regulations that would allow it to do so.

In addition to regulating lenders and financial intermediaries, DFPI licenses and regulates financial products and services, including state-approved banks, credit unions, commodities, investment advisors, money transfers, offering and selling securities, franchises, brokers, merchants, non-bank installment lenders, payday lenders, mortgage lenders and service providers , student loan providers, escrow companies, clean energy program (PACE) managers, debt collectors, lease-to-own contractors, credit repair companies and consumer credit reports, debt forgiveness companies, and more.

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