TMX Finance, the biggest auto title lender in the country, is expanding into Ohio, where it plans to open 12 outlets. Payday loans were officially banned there in 2008, but the state unofficially allowed the lenders to continue. Car title lending is not specifically sanctioned; but, like with the payday lending industry, there are loopholes that allow them to operate under other statutes.
Title lenders like Ace Cash Express and LoanMax began doing business in Ohio last year. The Department of Commerce granted LoanMax and TitleMax credit services organization licenses, even though the Center for Responsible Lending's Uriah King says his group does not believe this is a legitimate application of the state's credit services organizations act.
Cleveland-based think tank Policy Matters Ohio has asked the state to enforce the credit services organization law that prohibits license holders from directly issuing loans, but the legislature has not acted. Both payday and car title loans can carry triple-digit interest rates; with the latter, consumers borrow against their cars rather than their next paycheck. Cash-strapped drivers who lose their cars to repossession can face even more complications, such as how to get to work. “Driven to Disaster,” a report by the Consumer Federation of America and CRL, found that the average title loan borrower took out eight loans, suggesting that consumers often cannot repay their loans.