Virginia considering regulating car title loans
Published: June 30, 2009
Virginia is considering putting the brakes on the repo man, but there's disagreement on how to do it.
A General Assembly panel yesterday opened hearings on a possible clampdown on car-title loans, under which borrowers -- often with poor credit histories -- use their cars as collateral and lose them if they fail to repay.
The industry, which typically charges 300 percent to 350 percent in annual interest, operates in Virginia with few restrictions.
Through a vast corps of lobbyists and $1.1 million in contributions to legislators since 2002, lenders are pressing for restrictions that won't threaten profits.
Dewey B. Morris of Richmond, a lawyer who specializes in consumer finance and represents four car-title lenders, said firms don't want borrowers' vehicles.
Often they are of little value, because owners won't maintain them if they anticipate ducking a loan, he said.
One of Morris' clients, Community Loans of America, repossesses cars and trucks on only 5 percent of failed loans. Morris said two in 10 loans default.
Jay Speer, a lawyer for the Virginia Poverty Law Center, said car-title lenders should operate under a law restricting interest on consumer loans to 36 percent.
Growing concern about the impact on the work force of high-cost loans, such as car-title and payday loans, has even prompted Virginia government to offer alternatives to its employees.
The state expects to announce next month an emergency-loan program under which workers could borrow small sums at low rates.
Seventeen states regulate cartitle loans; 24 states and the District of Columbia ban them or limit interest rates to those allowed on consumer loans.
Virginia car-title lenders believe a Tennessee statute could be model for a law here. In place since 2005, the Tennessee law limits loans to $2,500 but requires an upfront fee based on 20 percent of the loan and allows modest reductions in principal after the loan is renewed a third time.
The downturn and restrictions this year have cut deeply into payday lenders' profits, forcing them to offer pricier alternatives.
Contact Jeff E. Schapiro at (804) 649-6814 or
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Reader Reactions
jistanidiot , just a guess but do you or your family work for a payday loan company. Cause it sure sounds like it. The General Assembly should be ashamed they let this type of business go on for as long as it has!Shame on them.
This is ridiculous. First it was pay-day loans, now it is car loans. when will the General Assembly stop mucking around in people’s personal affairs?
If you need money badly enough (and are such a high risk) that you can only get a loan at 300% interest you’re probably grateful for the immediate money.
If they outlaw these loans, the end result will be that poor people will suffer. This new proposal will only make people’s lives harder. For shame on the General Assembly for even considering such legislation.
Unfortunately, the only way to protect those so ignorant (or in some cases, needy) from themselves and the predators is to regulate, regulate, regulate.
Yep - should have been addressed same time as the payday loans as suggested by anonymous…
These payday loans and car title loan people are no better than Bernie Madoff…they are stealing other people’s hard earned money and cars.
Shut these folks down forever!
panative, Don’t matter what the money is used for, fact is they are loan sharks!!They prey on the needy.
I hope the General Assembly regulates them out of business. Someone needs to stand up for the average and low income voters in Virginia. Enough with the lobbyists.Let these loan sharks go out and get a real job.
EDUCATE! EDUCATE! EDUCATE! Maybe if people would live within their means then they wouldn’t be losing their cars. Did Anonymous’ ex-husband need the money for his new cell phone/blackberry/bluetooth/satellite/
spinning rims/ Wii/PS3 et..or maybe 2K got him 4 Reskins tickets? Not everyone is an idiot so why penalize the “credit score challenged”? Basic math + common sense = Intelligent Decision. Enough regulating already!
1…this should have been addressed at the same time the ‘payday loan’ companies were addressed.
2…the statement that these companies try to avoid repossession is pure and simple BS. my ex-husband took out a title loan for $2000 and his payments were $600-800 a month (if the payment was a day late they slammed him with extra interest). he’s never been good with his finanaces (hence the need for the loan) and he certainly couldn’t afford the outrageous payments. the title loan loansharks didn’t hesitate to repossess his vehicle & sell it at auction.
It should be illegal to charge 300 percent interest loans.Even the credit card companies can’t pull that one off.These parasites prey on the ones who can afford it the least.I hope the legislature chooses the people over the title loan lobbyists.This type of so called business needs to be very well regulated.
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