Car Title Loans and Another Assembly Study

Lynchburg News & Advance
July 16, 2009

Virginia, like many other states, limits the interest that can be imposed on consumer loans. That 36-percent ceiling does not apply, however, to car title loans -- which, despite their predatory nature, are essentially unregulated in the state and typically charge as much as 350 percent in annual interest. A panel of lawmakers who convened in June to examine the issue left their brainstorming session with no solution, only a promise to study the matter further. The editors of the Lynchburg News & Advance hope that after doing so and meeting again in September, the panel will agree that a 36-percent cap on APR is needed to rein in title lending -- which some perceive as even worse than payday loans because the borrower stands to lose ownership of his or her personal vehicle. "[Both types of lending] can both trap borrowers in long-term debt, but with the payday loan, the collateral is a personal check," explains Center for Responsible Lending senior researcher Leslie Parrish. "With a car title loan, it's probably the family's most important asset."