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Title max location6/24/2023 ![]() ![]() The Third Circuit reversed and ordered the district court to enter judgment in favor of the DOB. The district court, after concluding that the DOB’s petition did not require it to abstain from hearing the case under the Younger abstention doctrine, found that the subpoena’s effect was to apply Pennsylvania usury laws extraterritorially in violation of the Commerce Clause. ![]() The DOB separately filed a petition to enforce the subpoena in Pennsylvania state court. It stopped making loans to Pennsylvania residents after receiving the DOB’s subpoena and filed an action in federal district court seeking injunctive relief for, among other things, Commerce Clause violations. TitleMax charges interest rates that are substantially in excess of the rates allowed by the Pennsylvania Consumer Discount Company Act or the state’s Loan Interest and Protection Law. Borrowers can make loan payments using various methods (e.g., mail, calling TitleMax to use a debit card, using a local money transmitter to send funds to a TitleMax location) that allow them to remain physically present in their home states. TitleMax also conducts various activities in the borrower’s state (which the Third Circuit referred to as “servicing activities”), such as collecting payments, sending phone calls or text messages, and repossessing vehicles. Under the loan agreement, a borrower grants TitleMax a security interest in the vehicle which TitleMax records with the appropriate authority in the borrower’s state, such as the Pennsylvania Department of Transportation (PennDOT). It claimed that it never used employees or agents to solicit Pennsylvania business and, while its advertisements could reach Pennsylvania residents, it did not run television ads in Pennsylvania. TitleMax has no offices, employees, agents, or brick-and-mortar locations in Pennsylvania and is not licensed in Pennsylvania. The entire loan process-from application to the execution of a loan agreement to the disbursement of funds-takes place at such locations, with a borrower receiving the loan proceeds at a brick-and-mortar location in the form of a check drawn on a bank outside of Pennsylvania. ![]() TitleMax makes auto title loans from brick-and-mortar locations outside of Pennsylvania. Weissman, the Pennsylvania Department of Banking (DOB) issued a subpoena to TitleMax requesting documents regarding TitleMax’s interactions with Pennsylvania residents, including loan agreements between TitleMax and Pennsylvania residents. The decision could have significant implications for all providers of consumer credit whose operations involve cross-border lending. Court of Appeals for the Third Circuit recently ruled that the application of Pennsylvania usury laws to auto title loans made to Pennsylvania residents who travel outside of Pennsylvania to obtain such loans does not violate the Commerce Clause of the U.S. ![]()
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