Car Title News
The latest news on car title loans, auto title loans and the car title lending industry from the Center for Responsible Lending.
- Partnerships Address Payday and Auto Title Lenders in Dallas
Dallas South News 25 Jan 2012
A coalition of consumer advocacy groups, churches, synagogues, and other non-profit agencies in Dallas were able to make some headway in last year's state legislation session in terms of how credit service organizations operate. Most payday and title lenders are registered in Texas as CSOs -- which as of Jan. 1 must clearly disclose fees, report on consumer and transaction data, compensate borrowers harmed by a violation of CSO regulation or finance code, register with the Office of Consumer Credit Commissioner (OCC), and provide and OCC help line number to borrowers. The group, the Anti-Poverty Coalition of Greater Dallas, said payday and auto title loans charge excessive interest rates and trap consumers in a nasty cycle of debt. The organization's lobbying efforts also made strides locally, with the Dallas City Council unanimously passed a zoning ordinance that requires short-term lenders to not operate within 1,500 feet of a like establishment, operate at least 300 feet from a residential district, and possess a specific use permit in all districts. Finally, the loan principal for a payday loan in Dallas now must be capped at 20 percent of the borrower's gross monthly income, while car title loans are capped at 3 percent of the borrower's gross annual income.
- Richard Cordray, CFPB Chief, Promises New Scrutiny of Banks That Make Payday Loans
Huffington Post 19 Jan 2012
Consumer Financial Protection Bureau director Richard Cordray, speaking in Birmingham, Ala., this week at the agency's first public hearing, pledged to turn the heat up on payday lenders -- including a select few traditional banks that have started to offer their own version of the short-term advances. Those banks have tried to differentiate their cash-advance products from those of payday lenders because of the way in which they are structured, but consumer advocates do not buy that argument. Based on its data, the Center for Responsible Lending finds that bank payday lenders are bound to fall victim to the same cycle of debt that befalls traditional payday customers. The statistics, purchased by CRL from an independent vendor, show that bank payday borrowers take out 16 loans and are mired in debt 175 days out of the year -- or twice as long as the Federal Deposit Insurance Corp. considers healthy. "The very structure of a bank payday loan makes it likely to trap customers in long-term debt even while the bank claims that the loans are meant for short-term use," noted CRL senior policy analyst Rebecca Borne. Moreover, because the bank model requires the borrower to have a checking account and to have pay and/or benefits deposited directly into that account, the risk of default is relatively low -- meaning that the rates banks charge for this service are strictly for profit. "We recognize the need for emergency credit," Cordray acknowledged at the Jan. 18 event. "At the same time, it is important that these products actually help consumers, rather than harm them."
- Assembly Kills Legislation to Regulate High-Interest Car Title Loans
Sacramento Bee 13 Jan 2012
Legislation to regulate car title loans in California recently failed. Assembly Bill 336 would have targeted loans offered at annual interest rates between 72 percent and 180 percent to car owners who have low credit, need quick cash, and have few other options for borrowing money. Currently, state law does not cap the interest rates charged on car-title loans of more than $2,500. The measure would have required the short-term lenders to use additional disclosures, including informing borrowers of the total costs over the life of the loan. Additionally, the measure would have banned structuring car title loans as a combination sale and leaseback transaction. Critics of the proposal said it would leave borrowers with even fewer options and that high interest rates are necessary because the company assumes all of the risk.
- New Hampshire House Passes Title Loan Bill
Associated Press 04 Jan 2012
Businesses offering short-term loans using automobiles as collateral soon will be able to demand 25 percent interest per month in New Hampshire. The state House passed a bill on Jan. 4, over Gov. John Lynch's objections, that permits New Hampshire's title loan lenders to charge the steeper rate. The Senate overrode the veto in September, so the bill becomes law in 60 days. Lynch said the legislation permitted excessive rates to be charged that would hurt families, communities, and the economy. The current rate is 36 percent annually, the same maximum rate established by Congress in 2006 on title loans to military members. Supporters argued the bill allows greater options for consumers who need a short-term loan, while opponents warned that it would ensnare individuals in high-interest loans they could not repay.
- NH House to Consider Title Loan Bill
Associated Press 03 Jan 2012
The New Hampshire House is taking up a legislation that would allow the state's title loan lenders to levy more than 25 percent interest a month. The Senate overrode Gov. John Lynch's veto of the bill in September. The House intends to vote on it Jan. 4. Lynch said the bill allowed excessive rates to be imposed that would hurt families, communities, and the economy. The current rate is 36 percent annually, the same maximum rate set in 2006 by Congress on title loans to members of the armed forces. A title loan is a short-term loan that uses an automobile as collateral. Supporters say the legislation gives consumers seeking a short-term loan more options.
- Ecumenical Group Advocates for Social Justice
West End Word 14 Dec 2011
Members of the Metropolitan Congregations United in Missouri are willing to take a proactive stance to correct social injustices to help the poor. "A lot of people are frustrated that our financial institutions and our Congress are not stepping up to address some very serious problems," said Rev. David Gerth. "So people are ready to go to the streets to do the work that needs to help people with fairness and justice issues." On Dec. 6, 600-plus individuals gathered at a church in St. Louis to collect enough signatures for a payday loan measure, which would cap interest rates on short-term loans at 36 percent. Additionally, the group is working to help families trapped in home foreclosures, to protect the state's minimum wage, to help defeat a "mega" sales tax proposal, and to reduce sky-high interest rates on payday and other predatory loans.
- Soldier Sues Title Lender, Claiming Abusive Practices
Atlanta Journal-Constitution 17 Nov 2011
soldier stationed at Fort Benning has filed a lawsuit against an Atlanta-based payday and title lending firm and a subsidiary alleging abusive and illegal practices. Staff Sgt. Jason Cox claims to have borrowed $3,000 from Alabama Title Loans, using his 2002 Dodge Durango as collateral. The lender, a unit of Community Loans of America in Atlanta, charged him an interest rate triple that permitted by the Military Lending Act, the complaint argues. The loan reportedly rolled over multiple times, and the debt quickly snowballed to $4,500 over several months. Cox was unable to stay on top of his payments, and the vehicle was repossessed in August from base housing on the Columbus-area Army post. The suit, filed on Veterans Day in U.S. District Court in Columbus, seeks class-action status.
- City Eases Title Loan Location Requirements
Standard-Examiner 23 Oct 2011
Following a recent change to a city law, title loan companies in Riverdale, Utah, no longer have to fret over the distance between their establishments and neighboring residential areas. Local authorities unanimously approved permitting title loan companies as a conditional use in C3 commercial zoning areas and removing any reference to measurements from residential zones. Payday lenders and check-cashing businesses, along with banks and credit unions, are also listed as permitted uses in the same ordinance within a financial institution category. The change means that such establishments are no longer required to set up shop at least 500 feet from any residential zone or dwelling use.
- Riverdale Considers Restricting Title Loan Companies
Standard-Examiner 13 Oct 2011
Riverdale, Calif., officials are weighing an ordinance that would restrict title loan companies locally. "With the growth of all these types of businesses lately, cities are concerned how to prevent a flooding," explained City Attorney Steve Brooks. "We need to make sure we don’t have too many of these businesses." Planning authorities suggested allowing title loan companies only in C3 zones as a conditional use, similar to requirements applied to pawn shops and payday loan/check cashing outlets. The recommendation would mean title loan companies would have to be situated 500 feet from residential zones because of the "predatory" nature of the businesses. However, title loan company owners claim their business fits better into a financial institution designation than a payday loan category. City Administrator Larry Hansen, a former chief lending officer of a financial institution, was of a different opinion. "I equate [title loan companies] more closely with pawn-shop lending and check-cashing facilities in structure and type of lending," he said. "There is a considerable difference between title loan companies and other lending institutions."
- NH Senate Overrides Veto of Title Loan Bill
Associated Press 07 Sep 2011
The state Senate on Sept. 7 sanctioned New Hampshire's title loan providers to impose interest of up to 25 percent a month. In a 17-7 vote, senators agreed to override Gov. John Lynch's veto of the legislation, which now moves to the House. Lynch argued that the bill allowed excessive rates to be charged that would hurt families, communities, and the economy. The current maximum rate is 36 percent per year, the same cap set in 2006 by Congress on title loans to military personnel. Supporters contend that the legislation provides more alternatives for consumers in need of a short-term advance.
- Did Auto Title Loans Replace Payday Loans in Arizona?
AZFamily.com 01 Sep 2011
Arizona residents are finding auto title loans even more pernicious than payday loans, which were banned in the state more than a year ago. Jean-Ann Fox of the Consumer Federation of America, an organization that helped outlaw payday lenders, says that even though the 400 percent interest rates that came with payday loans have been banished, auto title lenders can still charge up to 204 percent interest while also putting one of a borrower's most valuable assets in jeopardy. "So, consumers pay a long time before they eventually default on loans and can lose their vehicle," Fox notes. Phoenix residents Joshua Hernandez and his wife Vanessa learned that the hard way when they took out a $663 payday loan with an interest rate of 180 percent. It took the couple eight months and $1,200 to finally retire their loan. But the amount they repaid is nearly double what they borrowed. "I caution anybody who tried to do the same thing that we did," Vanessa said. "It's just a warning don't do it!"
- UVA Researcher Looks at Banks' Effects on Neighborhoods
National Public Radio 19 Aug 2011
It is not surprising that banks are drawn to wealthy areas; but as it happens, they may also help make communities safer and better off. To find out more about that relationship, a University of Virginia researcher has been studying what transpires when banks move out of poor areas and why credit unions and banks can pay large neighborhood dividends. Greg Fairchild, director of the University of Virginia's Taylor Murphy Center, analyzed communities where banks have closed branches over the past few decades as a result of consolidation. "The areas outside of Northern Virginia, outside of Richmond, outside of general affluence were where the areas where bank branches were likely to decline," he determined. And when the banks vacated, he said, predators moved in. "These would be check cashers, payday lenders, automobile loan companies, title loan companies," he specified. Such businesses frequently charged very steep rates, up to 300 percent on loans, and predatory lenders were not the only ones who swooped in on bankless consumers. Moreover, the dearth of banking services made these workers vulnerable to violent crime -- robbery especially -- after paydays, Fairchild says. But when communities had banks, crime rates decreased, and that helped drive up property values.
- Quinn Signs Law to Protect Service Members From Predatory Lenders
Chicago Sun-Times 17 Aug 2011
The Illinois Payday Loan Reform Act has been signed into law by Gov. Pat Quinn, who said in a press release that the legislation "helps ensure that our service members and their families don't fall victim to predatory lending practices." Sponsored by Rep. Bob Pritchard (R-Sycamore) and Sen. Kimberly Lightford (D-Maywood), the bill steps up penalties on creditors that charge enlisted persons or their dependents more interest on payday, vehicle title, and tax refund anticipation loans than is allowed under federal law. Creditors in Illinois that exceed the 36 percent APR threshold will undergo a review by the state Department of Financial and Professional Regulation and face fines of up to $10,000.
- New Car-Title Lender in Chesapeake Draws Protest
Virginian-Pilot 16 Aug 2011
Consumer advocates took their campaign against car title lending to Great Bridge, Va., on Aug. 15, waving placards warning "Predators at Work" and "Don't Drown in Debt." The 10 protesters, shouting "Go home TitleMax," brought attention to a one-story outlet that opened earlier this month. The Virginia Poverty Law Center convened the demonstration out of concern that TitleMax and other title firms are opening stores close to the state line to attract borrowers living outside of Virginia, said Dana Wiggins, a spokesperson for the Richmond-based group. The state's General Assembly restricted the rate and terms of title loans in 2010, but earlier this year sanctioned them to service borrowers whose vehicles are registered in nearby states. After speaking with demonstrators at this week's protest, Chesapeake City Councilor C.E. Hayes Jr. said he would offer a proposal requiring title lenders to obtain conditional-use permits from the city before setting up shop. Title lenders sell high-interest loans to struggling individuals who use their personal vehicles as collateral. If borrowers neglect to repay the loans, they risk losing their transportation. The Virginia Poverty Law Center and other consumer advocacy organizations have long argued that borrowers are frequently snared by the interest payments on these loans and that some lose vehicles they need for their jobs.
- Albemarle Woman Sues Over Car Loan, Repo
Charlottesville Daily Progress 24 Jul 2011
An Albemarle County, Va., woman is suing title lender Allied Cash Advance over reportedly poor communication that resulted in her losing her car. Ramonda Brown is accusing the company of violating the Truth in Lending Act, improperly repossessing the vehicle under the Uniform Commercial Code, and misrepresentation under the Virginia Consumer Protection Act. Brown said she went to the Allied office, completed paperwork, and was given a check the same day. According to her lawsuit, Brown began making late payments beginning in 2010 through February 2011. The complaint said Brown made the payment for the previous month when she received her check on the third day of the following month. Allied employees reportedly knew that she would make late payments and would incur a late fee. After receiving her bill for $430.38 plus the $15 late fee, the suit said, Brown made a $445.38 payment on Jan. 3. The lawsuit says she then received "two confusing letters," one of which indicated that she had not acted within a 10-day waiting period that had not ended yet. Brown then contacted Allied, according to the suit. "Plaintiff was told that if she made her January payment as she normally did and then paid an extra hundred dollars, then her car would be taken off the repossession list," the lawsuit said. The complaint said Brown made that payment but then received a letter that said she had been sent a notice of default and had not acted within another 10-day period that had not lapsed yet. Brown's vehicle was repossessed on Feb. 25. Brenda Castañeda, one of the attorneys representing the complainant, said she has represented several people against title lenders. "With almost every set of paperwork that comes in ... I can always find a violation with state or federal law," Castañeda said.
- In Arizona, Title Loan Fast Money Can Mean Very High Interest Rates
ABC15.com 22 Jul 2011
A Mesa, Ariz., woman's financial crisis is a cautionary tale on taking out a title loan in Arizona. Like many young people just starting out, Jessica Gibbons got behind in her bills. She decided to take out a title loan for $2,500, using her 2010 Chevrolet Aveo as collateral. In most cases, a car title lender verifies employment, then has the borrower sign over title to the vehicle and sign the contract. The entire process typically takes about 15 minutes. After about four months, Gibbons starting getting behind on the payments, and the company that gave her the loan eventually repossessed her car. The interest rate on the title loan Gibbons received was not 8 or 12 percent, or even 20 percent; rather, it was 156 percent, meaning the $2,500 loan ultimately cost Gibbons more than $5,000. It could have cost even more if she did not own her car outright. Arizona is the only state that allows consumers to get a title loan even if they do not own their vehicle. So, if the borrower falls behind and the car is seized, the Arizona Consumers Council says they still must pay the monthly car payment and the title loan payment, too. "That's outrageous. That is a great example of predatory lending," said Tonya Norwood, executive director of the Arizona Consumers Council. "The lender puts the consumer in a position where they are not able to ever pay that loan off." Title lenders in the state can charge up to 204 percent, and their numbers have grown in the year since payday lending was banned in Arizona. More than 250 of the state's payday lenders changed their business model to become title lenders instead, and the total number of licensed title lenders today tops 1,000.
- Borrower Nightmares: $700 Dormitory Fee Costs Family Its Car
iWatch News 15 Jul 2011
A Martinsburg, W.Va., mother was overjoyed when her son won a selective spot at the American Musical and Dramatic Academy in New York, but the drama bled into real life when she took out a car title loan to pay an unexpected fee to reserve his dormitory space. Mildred Morris, a single mother with a steady federal job but no savings or credit cards, began the process of securing a college loan to pay Jonathan's tuition but was blindsided by the $700 dorm fee. She used her 2002 Pontiac Sunfire as collateral at Fast Auto Loans -- which quickly checked her references and then wrote her check. It warned that if Morris failed to make her payments, they could repossess her car. It was not until later that she realized how steep the interest rate on her loan was: 300 percent annually. "I should have taken time to go over it," Morris conceded. "When I saw how large it was, and I was like, wow." Morris fell behind on her payments and her vehicle eventually was seized by Virginia-based Fast Auto Loans. "I ended up losing my car over $700," she said. "I didn't want to let my car go, but I didn't have a choice" after falling behind on payments and seeing her references -- relatives, friends, and even her job supervisor -- receive calls from Fast Auto. Consumer protection advocates have long raised doubts about this type of credit. Car title loans, which are now regulated differently in each U.S. state, are on the list of priorities of the newly established Consumer Financial Protection Bureau, which officially begins operations on July 21. The Center for Responsible Lending's Uriah King, who says the title loan industry's "entire business model is loans that are made without the ability to pay," would like to see the CFPB restrict how often the products can be renewed -- a process that allows the lender to continue charging fees and interest but keeps the principal balance high. Jean Ann Fox of the Consumer Federation of America, meanwhile, hopes the new regulator will force title lenders to consider a borrower's ability to pay back the debt.
- Aldermen Extend Moratorium
Clinton News (Miss.) 10 Dec 2009
A 90-day ban on new title-loan businesses, pawnshops, check-cashing outlets, tattoo parlors, nail salons, and gold and precious metal purchasing outfits in Clinton, Miss., has been extended for an additional three months. Local aldermen made the decision in a unanimous Dec. 1 vote, providing more time for municipal leaders to draw up new zoning ordinances for the town -- which has at least six check-cashing outlets and four title lending businesses, both of which offer payday loans. Clinton Mayor Rosemary Aultman has stressed the importance of ensuring "that we get these businesses in the right location and have places for them." That line of thought already is playing out in other metropolitan areas. Jackson, Ridgeland, Canton and Byram all recently have imposed moratoriums on new permits for like businesses; while Flowood, Madison, and Pearl already have ordinances in place to regulate such businesses.
- Aldermen Put Hold on Certain Types of Businesses
Clinton News 10 Sep 2009
Officials in Clinton, Miss., have banned new title loan shops, check-cashing outlets, and other specific businesses from opening in the city in the next 90 days. The moratorium -- which also applies to tattoo parlors, businesses that buy gold and precious metals, pawn shops, and nail salons -- gives the Board of Aldermen time to study zoning laws in preparation for a big zoning revamp. The freeze affects at least four title loan stores -- many of which, along with the check-cashing locations, provide payday loans. "I've heard from many in the city that this [moratorium] is exactly the type of thing they want to see," commented Clinton planning and zoning commission member Ryan Tracy. "They want economic development to be channeled toward something that builds the community, and not something that has been viewed as a detriment."