Title Loans / by kevin murray

According to hufffingtonpost.com, "…some 127.5 million people -- are liquid-asset poor. If one of these households experiences a sudden loss of income, caused, for example, by a layoff or a medical emergency, it will fall below the poverty line within three months."  This means that a substantial amount of America's population are either ripe for exploitation from predatory lenders or on the cusp of being exploited by them, if they are unsuccessful in finding monetary aid from more traditional lending channels, such as a FDIC insured bank which is regulated by law.  It is particularly troubling that in putting up your vehicle title as a security against a loan, this will often expose these people to the possible loss of their transportation, and the means thereby to get to and fro to work, to school, and to get around town.  In addition, for a one-time transfusion of cash, signatories have legally agreed to yet another bill, at typically rates that are 300% per annum or even more.


Responsiblelending.org reports that: "There are currently 16 states that explicitly allow title lending at triple-digit interest rates and four others that allow title lending through a legislative loophole."  While there isn't necessarily anything wrong with a consumer having the ability to pawn the title to their automobile to a third party, what is wrong, is that the structure of most of these deals significantly exploits the typically desperate consumer, who is often at wit's end.  We know that business is good at the title lender facilities, because of the tremendous growth in their business over the last few years.  For instance, azcentral.com reported for Arizona in April of 2013 that: "more than 430 auto-title-lending branches have been licensed in Arizona since 2009."  The nytimes.com reports that:  "…title loans in Virginia increased by 24 percent from 2012 to 2013, according to state records. Last year, the lenders made 177,775 loans, up roughly 612 percent from 2010," and "In Tennessee, the number of title lending stores increased by about 22 percent from 2011 to 2013, reaching 1,017."


It shouldn't be terribly surprising that title loan stores have been opening up at double-digit rates while also increasing their loan percentages impressively, since in so many of the States to which title loans are permitted, the annual interest rates are so usuriously high to the consumer, that the business model really comes down to making sure that the consumer selects your store rather than your competition, so consequently a high percentage of monies spent by title loan companies goes towards advertisements on television, on the internet, and on billboards.  Importantly, to the title loan originators and fundamental to their business, is the fact that by signing over your title to your vehicle, you have made the title loan company the de facto owner of it, so unless you abide by all the terms and conditions of said loan, and pay the loan off completely, your car is not really your car anymore.  This means, as a matter of course, as long as you truly own the title to the vehicle that the title loan companies therefore really don't care much about your credit or anything about you, because they definitely have a material asset which in virtually all cases is worth more than the loan that they provided to you.  To make things even easier for the title loan companies, some of these companies make it a condition upon the loan to you to add a GPS device to "your" car, or a starter interrupt device, in order to maintain control over your vehicle.


Title loan companies should not be in the position to offer loans to individuals without a reasonable cap associated with them, and the States that currently offer title loans should enact legislation to stop this unfair exploitation of their own residents.