Missouri Lenders Find Ways to Avoid Title-Loan Regulations

St. Louis Post-Dispatch
August 1, 2010
Hathaway, Matthew

Borrowers in Missouri are falling prey to unscrupulous lenders that avoid restrictions by classifying what seem to be title loans as different types of consumer loans that are less strictly regulated. Legislation was created in the state nine years ago to limit how many times lenders can roll over a debt, theoretically preventing consumers from getting trapped in a cycle of debt; but by offering "small loans," they can escape the legislation. The small loans are a different type of consumer debt that comes with fewer safeguards in Missouri. More than 20 percent of Missouri's licensed title lending locations can deal in small loans. Lawyers seeking to stop the practice say state watchdogs have allowed the lenders to overcharge thousands of consumers. According to Missouri regulators, lenders can dole out short-term, high-interest loans in exchange for a vehicle title and set of keys but still classify the loan as something other than a title loan. Additionally, the lenders are not required to provide annual lending data to the state. It is increasingly challenging, therefore, for borrowers to know what kind of loan is being offered; and lawyer John Campbell says companies should not be able to avoid restrictions simply by assigning loans a different name. Campbell has filed a class-action suit against one lender, Missouri Title Loans, which he believes has illegally classified more than 10,000 title loans as small loans.
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