Attorney General Bob McDonnell has filed a lawsuit against NJG, Incorporated and Nicholas J. Gianakos, the operators of Instant Cash Title Loans (“Instant Cash”), a Charlottesville-based automobile “title lender,” for violating Virginia’s Consumer Finance Act.

The alleged violations occurred during the period from June 2005 through December 2007. During this time, Instant Cash charged its borrowers interest rates that exceeded statutory limits and did not come within any of the exemptions to the Consumer Finance Act.

The company’s alleged wrongdoing was first brought to the attention of the Office of the Attorney General by Alan Zimmerman, a consumer reporter for the Charlottesville publication “The Hook.” Based on this information, the Office of the Attorney General launched an investigation into the company, which led to Thursday’s announcement of legal action.

“Virginia’s consumer lending laws must be strongly enforced to ensure that borrowers receive legal protection in the marketplace,” says McDonnell. “I am pleased that our Office has been able to move so quickly to address the alleged wrongdoing in this case.”

Unless exempt, the Consumer Finance Act prohibits unlicensed lenders from charging and receiving interest in excess of 12 percent per year on consumer loans. One exemption allows a lender generally to offer open-end credit and charge finance charges and other fees at an agreed-upon rate, as long as the lender provides the borrower with a minimum 25-day grace period to repay their loan in full before incurring a finance charge.

McDonnell contends that, during the relevant period, Instant Cash structured its title loans as closed-end credit and did not provide the required finance charge grace period. Instant Cash’s failure to comply with the requirements for open-end credit made its loans subject to the Consumer Finance Act, which it violated by charging interest greatly in excess of 12 percent annually.

The suit was filed in Richmond Circuit Court. It requests that the court declare all loans Instant Cash made in violation of the Consumer Finance Act “null and void,” and to grant judgment to the Commonwealth, for the benefit of Instant Cash’s borrowers, in an amount equal to the aggregate of all principal and interest collected on all of such loans.

Since June 2007, McDonnell has successfully negotiated settlements with six automobile title lenders. These settlements have provided the following total relief to consumers:

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

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

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