Tightening the Reins on Car Title Lending in VA
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February 15, 2010
RICHMOND, Va. - Some folks in The Commonwealth who find themselves in tight financial situations are tempted to get fast cash in the form a car-title loan - but for many, that quick fix turns out to be a long-term nightmare. Car-title lending is a practice where the lender gives cash to a borrower who uses a car as collateral.
Jay Speer, executive director of the Virginia Poverty Law Center, says these lenders are not regulated, which means they can charge extremely high annual interest rates and repossess a customer's vehicle - even when payment arrangements have been made - leaving the borrower with little or no recourse.
"Most of these outfits charge 300 percent to 400 percent interest. What often happens is they set up these loans that are just impossible to pay back and then people get behind. When that happens, it's devastating to people because when they lose their car, they lose their way to get work."
Six bills related to the loans are up for consideration today in the state Senate. Opponents of the bills say tighter regulations would cripple the car-title loan industry and that the loans help people who would not be eligible for loans elsewhere. Speer says charging people such high interest rates does far more harm than good.
When Anna Dorathea White was only able to work part-time as a nurse's assistant last year, she turned to a car title lender to help make ends meet. She was charged a 311-percent annual interest rate on her loan. When she missed a payment, the lender said she could make the payment in person at the office.
"So, I was in the shower to get ready to go over to pay them, but when I walked back out, my car was gone. So, I lost my job. I didn't have a way back and forth to work."