In Arizona, Title Loan Fast Money Can Mean Very High Interest Rates

July 22, 2011
ABC15.com 
car title lending news

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.
Web Link







Abstract News © Copyright 2008-2013 INFORMATION, INC.
Powered by Information, Inc.

Stay Updated

Join the fight against predatory lending. Enter your e-mail to sign up for breaking news, action alerts, and CRL's original research.

   Please leave this field empty
  

Help Us End Predatory Lending

Predatory lending destroys family wealth, and preys on our most vulnerable communities. You can help us end abusive lending practices by donating to CRL, or by sharing our work with others.



`