Triton Management Group, Inc. (Triton) and several related companies entered into a consent order with the Bureau of Consumer Financial Protection (Bureau) in which Triton agreed to a $1 civil money penalty, $500,000 in consumer redress, and injunctive relief. Triton is a financial services company that originates, purchases, services, and collects on short-term secured and unsecured loans. Triton operates over 100 locations in Alabama, Mississippi, and South Carolina.
The Bureau alleged that Triton engaged in deceptive conduct under the Consumer Financial Protection Act (CFPA) by providing misleading disclosures regarding the finance charge paid on auto title loans originated at one of six Mississippi locations. Mississippi law requires auto title loans to have a term of not more than 30 days, but allows for repeated extensions of the repayment period every 30 days provided certain conditions are met. Triton, in its loan documents, provided the finance charge and total cost of the loan associated with a one-month period, but provided a 10-month payment schedule. The Bureau contended that this 10-month payment schedule was the presumptive payment schedule and that Triton failed to disclose the actual finance charge associated with the 10-month payment schedule.
The Bureau further alleged that the failure to provide the finance charge associated with the 10-month payment schedule violated the Truth in Lending Act (TILA) because it did not clearly reflect the terms of the legal obligations between the parties.
The Bureau also indicated that Triton violated TILA’s advertising restrictions by posting three in-store advertisements that included the payment amount for certain loans without disclosing the annual percentage rate. TILA requires advertisements with certain trigger terms, including the payment amount, to include other mandatory information such as the annual percentage rate.
The Bureau identified $1,522,298 in interest payments made directly or indirectly by consumers that exceeded the amount of the finance charges stated in the disclosures. However, it agreed to reduce the amount of consumer redress to $500,000 based on Triton’s financial condition. The company’s financial condition is also the likely reason that the Bureau only assessed a $1 penalty.
The Triton consent order has implications for virtually all financial services companies. While the loans at issue were short-term auto loans, the CFPA and the cited provisions of TILA apply to virtually all financial services companies.
First, financial services companies should take note of the interplay between federal and state legal requirements. While it is impossible to be certain, it appears Triton’s efforts to comply with state law contributed to the inaccurate finance charge disclosures. While the tangled relationship between state and federal law can create compliance challenges, attempts to comply with state law do not excuse violations of federal law.
Second, financial services companies should pay close attention to their disclosures, especially disclosures regarding the amount of money paid by consumers. The post-Cordray Bureau may be less inclined to push the envelope, but this consent order indicates that the Bureau will require companies to refund payments of amounts that are not clearly disclosed. For Triton, the consumer loans made at just six of its more than 100 locations led to a potential exposure of over $1.5 million in consumer repayments—which could have been substantially higher had the Bureau imposed more than a nominal monetary penalty.
Third, financial services companies must closely monitor their advertising materials. The Bureau may have foregone an enforcement action if the three in-store advertisements were the only allegation at issue. That said, the Bureau clearly decided that the presence of only three in-store advertisements warranted mention in this consent order.