NJG, Incorporated and Nicholas J. Gianakos, the heads of Instant Cash Title Loans (“Instant Cash”), a Charlottesville-based automobile “title lender,” were sued by the Attorney General Bob McDonnell for violating the rules laid down by Virginia’s Consumer Finance Act.

Instant Cash didn’t come under any exemptions provided by the Consumer Finance Act and charged its customers a higher rate of interest that was much more than the legislative limits, for a period from June 2005 till December 2007, almost 2 and a half year.

Attorney General, Alan Zimmerman is a consumer reporter at Charlottesville publication “The Hook.” He first noticed the violations and reported the company’s misconduct to the senior authorities. This act led to the announcement of some legal action against Instant Loans, after a detailed investigation by the Office of the Attorney General took place.

McDonnell said, “To ensure borrowers don’t get cheated and get legal protection in market, Virginia’s consumer lending laws must be strictly imposed.” He further added that he is happy that his office took necessary legal actions against such illegal behavior so quickly.

According to Consumer Finance Act in Virginia, no unlicensed lender can charge or receive interest above 12% p.a. on consumer loans, unless exempt from the law. One of the exemptions included in the Act allows lenders to charge finance charges and other fees at an already agreed-upon rate by offering them open-end credit. But this exemption is limited to the fact that before charging any fees, the lenders must provide the borrowers a minimum of 25-days grace period in order to repay their loan in full.

During the specified period, Instant Cash declared its title loans as closed-end credit but did not make any specifications for the required finance charge grace period. It failed to comply with the conditions for open-end credit and charged more that 12% interest, which resulted in violation of the act.

The case was filed in Richmond Circuit Court. The court decided to declare all such loans that violated the terms of Consumer Finance Act as “null and void ab-initio” and in order to give justice and save the interests of borrowers, it further declared to return the loan amount, (i.e. principal + interest) back to borrowers.

McDonnell successfully negotiated settlements with six automobile title lenders since June 2007 that resulted in providing relief to consumers. Following are the stats:

- $458,668 in refunds to 2,637 borrowers

- $5,089,354.09 in forborne interest collection from 9,624 borrowers

- $1,926,969.88 in forborne deficiency collection from 2,944 defaulting borrowers who repossessed their vehicles.