Virginia Considering Regulating Car Title Loans

Richmond Times-Dispatch 
June 30, 2009
Schapiro, Jeff E

Legislative hearings on June 29 in Richmond, Va., centered on possible new controls for the state's car-title loan business. Title lenders serve borrowers who use their personal vehicles as collateral for short-term loans bearing interest of 300 percent to 350 percent, and customers lose ownership if they do not repay the debt. The car-title industry operates in Virginia with little regulation, but lawmakers now are looking to join the dozens of other states that either prohibit or regulate such lending. At issue is how to pursue change: Jay Speer of the Virginia Poverty Law Center argues that the industry should be subject to an existing law that caps interest on consumer loans at 36 percent, but industry players are looking for restrictions that will allow them to remain profitable. If they must be regulated, they prefer a measure modeled after Tennessee's 2005 car-title law, which limits loans to $2,500 or less but requires an upfront fee based on 20 percent of the loan. The guidelines also leave room for small reductions in principal after the loan is renewed a third time. As legislators try to hash out a solution to rein in the industry, the state government in the meantime is acting to mitigate the impact of high-cost loans on its workers. A new emergency-loan program slated to roll out in July will allow government employees to avoid car-title and payday lenders by borrowing small sums of money at low rates.
 

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