LoanMart, operating under the corporate name Wheels Financial Group, charged car title loan borrowers interest rates far exceeding California’s legal limits during 2020, including one example where a borrower paid 100.73% APR on a $2,951.87 loan—nearly three times the state’s 36% cap. The class action lawsuit Weeks v. Wheels Financial Group (Case No.
RIC2002418) in Riverside County Superior Court addressed these violations for loans issued between January 1, 2020, and November 15, 2020. The company allegedly used partnerships with out-of-state banks to circumvent interest rate restrictions, a practice scrutinized by California’s Department of Financial Protection and Innovation (DFPI) starting in September 2020. While the settlement includes no admission of liability from LoanMart, the company was required to enter a consent order with the DFPI, indicating regulatory enforcement.
Table of Contents
- What Are Car Title Loans and How Did LoanMart’s Rates Exceed Legal Limits?
- The California Investigation and Settlement Details
- How Interest Rate Caps Are Supposed to Protect Borrowers
- Who Qualifies for the Class Action Settlement and How to File a Claim
- LoanMart’s Operations Beyond California: Multi-State Compliance Failures
- The Role of Regulatory Agencies and Future Enforcement
- What This Settlement Means for Protecting Future Borrowers
What Are Car Title Loans and How Did LoanMart’s Rates Exceed Legal Limits?
Car title loans are short-term, high-interest borrowing products where the lender holds the title to your vehicle as collateral. Borrowers use these loans for emergency cash needs but face the risk of losing their vehicle if they cannot repay. The appeal lies in fast approval and minimal income verification, but the costs are substantial—legitimate title loans in california are legally capped at 36% APR, a threshold designed to prevent predatory lending. LoanMart’s documented scheme involved charging rates that far exceeded this limit.
One affected borrower on a $2,951.87 principal paid 100.73% APR, while other consumers reported average rates between 36% and 99%, with some complaints citing rates as high as 300% APR. The company achieved these illegal rates by partnering with a Utah bank and marketing itself as a non-lender, purportedly placing the loans under the bank’s charter to evade California’s interest rate caps. The California DFPI’s investigation found that this “rent-a-bank” structure was a clear violation of the state’s Fair Access to Credit Act (FACA), which was specifically designed to block such workarounds.
The California Investigation and Settlement Details
California’s Department of Financial Protection and Innovation launched its investigation into Wheels Financial Group in September 2020 after identifying potential violations of state lending laws. The investigation revealed that LoanMart systematically structured transactions to evade the 36% APR cap by partnering with a Utah-based financial institution, a scheme known in the industry as “rent-a-bank” lending. Unlike some enforcement actions that result in only fines, the DFPI required Wheels Financial Group to enter a consent order—a binding agreement to cease illegal practices and comply with state law going forward.
The class action settlement addressed loans issued within a specific 11-month window: January 1, 2020, through November 15, 2020. The affected class was limited to borrowers who took out original principal amounts between $2,500 and $9,999—the range where LoanMart concentrated its predatory lending. While the settlement does not include an admission of liability by LoanMart, the consent order with the DFPI effectively validated the regulator’s findings about the illegality of the company’s practices. This type of settlement structure is common in lending cases where the company agrees to reform without conceding wrongdoing in court.
How Interest Rate Caps Are Supposed to Protect Borrowers
California’s 36% APR cap on title loans exists specifically to prevent exploitation of borrowers who lack access to traditional credit. At 36% annual interest, a $2,500 loan over one year costs $900 in interest alone—already substantial for borrowers in financial distress. When LoanMart charged 100% APR or higher, borrowers paid four to ten times the legal limit, transforming a bad situation into a debt trap where the interest accumulated faster than many borrowers could repay the principal.
The legal framework protecting borrowers includes both absolute rate caps and licensing requirements designed to keep predatory lenders accountable. However, some lenders exploit a loophole by partnering with banks chartered in other states (particularly Utah and Wyoming, which have minimal rate restrictions) and claiming they are not technically making the loan themselves. The DFPI’s action against LoanMart established that California’s rate caps apply regardless of which institution technically holds the loan—if a lender is operating in California and accepting the economic benefit of the transaction, they are bound by California law.
Who Qualifies for the Class Action Settlement and How to File a Claim
Borrowers who took out car title loans through LoanMart between January 1, 2020, and November 15, 2020, and had an original loan principal between $2,500 and $9,999 are potentially eligible for compensation. The settlement specifically named this period and loan range because these were the transactions most directly affected by the documented overcharging practices. If you borrowed outside this window or with a different principal amount, you would not qualify under this particular settlement, though other legal remedies may apply.
To file a claim, affected borrowers typically need to submit documentation proving they held a LoanMart loan during the covered period. Official settlement information can be found through the settlement website established for this case, which will provide claim forms and instructions. The deadline for filing claims is usually published on the settlement notice; missing this deadline typically forfeits your right to compensation. For detailed instructions, borrowers should reference the official class action settlement notice, which provides the claims process and deadline information.
LoanMart’s Operations Beyond California: Multi-State Compliance Failures
While the class action lawsuit focused on California, LoanMart’s compliance problems extend to other states where the company operates. In North Carolina, for example, LoanMart operates without state registration and charges 36% to 99% APR, violating the state’s 16% interest rate cap that applies to unlicensed lenders. North Carolina law distinguishes between licensed and unlicensed lenders, with unlicensed lenders subject to the lower 16% cap as a protection against predatory operators. LoanMart’s failure to obtain a license in North Carolina and its continued charging above the unlicensed lender threshold demonstrates that the company’s approach to rate caps was systematic rather than isolated to California.
The multi-state nature of LoanMart’s violations is reflected in regulatory complaints. The Better Business Bureau has 136 complaints on file against LoanMart, while the Consumer Financial Protection Bureau (CFPB) has received 45 complaints about the company. These complaints span multiple states and often cite the same issues: unexpectedly high interest rates, unclear terms, and aggressive collection practices. For borrowers in states other than California, the regulatory landscape may differ, and claims would need to be evaluated under state-specific lending laws.
The Role of Regulatory Agencies and Future Enforcement
The California DFPI’s consent order with Wheels Financial Group signals ongoing regulatory attention to rent-a-bank lending schemes. Consent orders are not the end of enforcement—they establish benchmarks for compliance that regulators monitor. If LoanMart continued to violate the terms of the consent order, it would face additional penalties or potential shutdown of operations.
The DFPI’s willingness to investigate and enforce rate caps sends a message to other lenders that California will scrutinize structures designed to circumvent the law, regardless of how the company is incorporated or which institutions it partners with. The multi-agency approach—involving both state regulators and the civil litigation system—has proven effective in addressing LoanMart’s practices. The CFPB and BBB provide channels for consumers to report violations, and these complaints create a public record that supports regulatory action. Future borrowers considering a title loan should check these databases and verify that any lender is properly licensed in their state and willing to disclose APR clearly before accepting any loan.
What This Settlement Means for Protecting Future Borrowers
The LoanMart case illustrates both the power and the limitations of enforcement against predatory lenders. On one hand, the DFPI’s investigation, the class action lawsuit, and the resulting consent order all demonstrate that regulators and courts take interest rate caps seriously and will hold lenders accountable. On the other hand, the fact that LoanMart was able to operate for an extended period charging illegal rates—with multiple complaints accumulating on regulatory databases—shows that enforcement lags behind misconduct.
For future borrowers, the key lesson is to verify licensing and request written disclosure of the APR before committing to any loan. If a lender quotes a rate that exceeds the legal cap in your state, that is a red flag. Consumers can also check the BBB and CFPB complaint databases, or contact their state’s financial regulator directly to confirm that a lender is properly licensed and compliant. The LoanMart case demonstrates that predatory practices do get challenged eventually, but waiting for litigation to recover overcharged interest is far slower than avoiding predatory lenders in the first place.