Where’s Compassion for Virginians Without Credit?

ATLANTA The Virginia Interfaith Center for Public Policy is at it again ("Don't Make Virginia Do Tenn. Two-Step," Sept. 28) when it claims the car title lending industry "poses a signifi PHIL
KENT
cant threat to moderate and low-income consumers in Virginia." It is just the opposite. More and more people with no credit are hurting in these tough economic times, so the title loan industry is a proven financial lifesaver to many moderateand low-income consumers.

Anyone with a clear title to their vehicle can obtain emergency cash quickly through a car title loan. What about "triple-digit annual interest rates" that the center's writer thunders against? Here's what the writer doesn't say: By law, no interest is charged for the first 25 days and the monthly interest rate is in the 25 percent ballpark. Why so high? It is because 30 percent of our customers pay on time with no interest owed, and upward of 20 percent default.

The writer also frets about vehicle repossessions, and chides Virginia lawmakers for looking at a Tennessee industry regulation law for guidance. "Many car title loans there ultimately result in repossession," the writer claims. Yet that is a myth of biblical proportion.

It isn't in the industry's interest in any state to initiate a costly repossession process. Remember, these title loans average $500 for short terms. The cost of a tow truck is around $250. Paying to auction off the car would be another $250. And if an old model is abandoned and in need of repair -- as is all too often the case -- the cost is too prohibitive to do anything. The industry must write off these vehicles -- and of course lose a significant amount of money.

By the way, if a customer's car should become totaled or stolen while the title is being held as collateral, both parties lose. The customer loses the vehicle and the company has no legal recourse. In comparison, defaulting on a traditional loan could result in the lending institution bringing legal action against you for the debt.

Our customers -- though having an average household income in excess of $50,000 annually -- have no access to credit. Almost 80 percent have no credit cards. Banks and credit unions won't touch them. But many are satisfied repeat customers -- such as the tradesman who needs money for supplies quickly and, when the project is completed and he is paid, then he pays off the loan.

There is regulation in Virginia, contrary to the writer's claim. There is full disclosure before a loan is made. We cannot ask customers to lie about their incomes and then give them cash based on this lie. We verify employment and salary from the customer's questionnaire. Our industry must comply with truth-in-lending law. There are no late penalties or hidden insurance or fees. There are no wage garnishments or judgments. A default does not affect your credit score.

A title loan is simply an optional tool consumers or small business owners can use to borrow against equity in their motor vehicles. And consider this: Isn't regulated lending at, yes, higher interest rates much preferred to the unregulated alternative of barroom lending or rip-offs on the Internet?

There are rogue operators in any industry -- and they should be and have been punished in Virginia, Tennessee, and elsewhere. But the title loan is basically an honest transaction between two willing parties. A responsible borrower is one who understands these loans are for emergencies, one who has chosen to enter into the transaction because cheaper alternatives are not available, and one who alters his budget in order to pay back the money in a timely fashion. And, by the way -- unlike some banks, car companies, and Wall Street institutions -- our industry doesn't ask taxpayers to cover our losses when business is bad.

The Virginia Interfaith Center for Public Policy is well-known for championing the cause of illegal immigrants and getting them support services. So where is its compassion for financially pressed Virginia citizens, legal residents, and even undocumented workers who can't obtain credit of any kind? The title loan industry offers them a hassle-free lifeline -- and almost half are satisfied repeat customers. We hope

The Times-Dispatch interviews these customers that the Interfaith Center chooses to ignore.

Our industry is receptive to regulation that is a reasonable balance between a business and the consumer. Let's just not destroy a needed industry in Virginia or any other state with regulatory overkill.

Phil Kent is communications director of Fast Auto Loans of Virginia. Contact him at .