Posted on 12/29/2005 11:09:46 AM PST by Extremely Extreme Extremist
DES MOINES, Iowa -- Most people who need a car title loan need cash quickly.
There are several lenders that offer loans in which the borrower hands over their car keys and title in exchange for a few hundred dollars. The problem is that interest rates for car title loans can leave the borrower owing much more.
But the Iowa attorney general said interest rates of up to 300 percent and more are simply unfair to the borrowers.
"In my opinion, car title loans are unfair," said Tom Miller, Iowa's attorney general.
Leckness has to get a ride for her family because her car was repossessed. She borrowed $300 from Loan Max at Merle Hay and Hickman roads in the summer. She then missed a payment, her 1990 Honda was repossessed and she now owes more than $1,700.
"I have people give me rides on a daily basis. I'm very grateful for that," said Brianne Leckness, a loan customer.
Leckness is no longer a fan of car title loans.
"It seems like a great idea. … You get so involved and you can't get out," she said.
Miller wants the Legislature to crack down on car title loans and what he calls the "outrageous" interest rates. He said since lenders have the car title, the risk does not justify triple-digit interest rates.
"If they are going to have the security of a car, they need to charge a reasonable rate, not 300 percent or 200 percent or anything like that," Miller said.
Loan Max Owner Rod Aycox said he's made 30,000 loans in Iowa with few complaints. He said he is proud of his business, and it helps people with bad credit.
Leckness wants to warn others.
"I hope it does help other people who say they don't want to be worse off down the road," Leckness said.
During the last legislative session, Iowa lawmakers came very close to cracking down on car title loan programs. Miller said that he hopes lawmakers will pass tougher rules early next year.
The legislation would likely outlaw 300 percent interest rates and lower them to somewhere between 20 and 30 percent. If that happens, the owner of Loan Max said he would shut down his business because he could not make any money.
So THAT's the appeal of Jesse Jackson & Al Sharpton! [sarcasm on]
As I understand it, Iowa is one of the few states without an usury law.
Maybe there's a reaon the other ones have such a law?
Predatory lending? Sure. Should it be illegal? No. These loans are what the market will bear. If they're adults, they should be able to contract freely. I would never advise someone to take one of these loans but if they do so, it is none of my (or the government's) business.
What's a usury law?
Leckness is no longer a fan of car title loans.
She has now properly paid for her education......
Then stand on the sidewalk outside Loan Max with a sign that says, "Don't Be A Moron Like Me!"
The attorney general is right on this one, but not for the reasons you think. Here in Mobile, Title Loan shops are sprouting up every single day, and you'll often see two competing franchises of the industry in the same damned office complex, and they have now expanded to every damned corner of the city, including nice areas (how long they remain nice is another question)
This is bad because well, no one sensible wants to be living near a title loan shop for the fear that it would bring the wrong element too near to their homes (because it will. I just as soon would have the city pass some kind of ordinance banning them in the city limits, though at this rate, it's too late because they have become so entrenched (and this is basically in the last two years)
A Title Pawn store is just that, a pawn store, no one in their right mind wants to live near a pawn shop, unless the neighborhood is heavily patrolled, or old money, or something like that. We should go after title loan businesses because as you increase the number of title loan shops, inevitably, you're going to increase the rate of crime.
Nobody is putting a gun to peoples heads, making them sign the contract. Who signs a car title loan? The mentality that it takes to do that is the same mentality that gets someone in finacial trouble to begin with.
Usury is the act of lending money at a very high interest rate, generally over 100%. Most states have laws against this sort of transactions. These laws have been used against organized crime for many years.
Actually, alot of the Southern states don't have these kind of laws, I know in Alabama, the typical APR on a title loan is around 250%
Maybe - just maybe - if people belonged to churches, did charitable work or were otherwise involved in their communities they could get a helping hand when the chips were down, instead of allowing themselves to be suckered.
If he can't make any money doing fully secured loans, where he has physical possession of the collateral, at 20-30% interest rates, he's the most incompetent businessperson on the planet.
Now if loanmax is hiding its interest rates, or doing something without disclosure or misleading its borrowers, thats different.
If they are disclosing all viable information and everything is open and transparent and their is an informed decision making person, then the government has absolutly no right to regulate what the business can charge or legislate what an appropriate profit margin is.
Any other arguement is simply stupid populist nonsense.
I used to work in an office that was next door to a pawn shop.
Never had any problems, and around the time the pawn shop was there, crime started dropping in the neighborhood.
Ironically, when the pawn shop closed down (poor business), crime started rising in the area, we eventually just moved our office.
We still try to figure out how and why that happened.
They also fail miserably.
NYC still has problems with loan sharking.
But I still don't get how the lender can lose money as long as it's secured with the car title and he didn't loan more than say, 50% of the value.
Because most cars who's titles get pawned are pieces of crap, and it's not like a title loan shop is a legitamate bank or anything, they basically operate on a shoestring revenue source, they have no grand investments to shore them up, they have to cover what they pay out with what they take in, with no other considerations. In that since, they are much more like your average business than the typical bank. And it's not as if the most reputable and knowledgable business people are running these things, because if they were that good at business, they'd be doing better than running a title loan operation.
He's not in physical possesion of the collateral. These saps keep their cars as long as they make the payments. The lender has to get a repo man to grab the car if the borrower doesn't turn in the car voluntarily when he defaults.
There was a case locally where a guy pushed his car off a cliff rather than turn it in to the title loan operation.
Unfortunately these outfits do prey on the young (and uniformed, thanks to a public school system that would rather teach diversity and gayness, than anything practical). They provide quick loans with little in the way of applications, but if a payment is missed or late the rates skyrocket with no possible way for the person to pay the loan off. IMHO these are in no way to be considered to be legitimate business any more than drug dealers.
Ah, I read "hand over their car keys" and interpreted it to mean they no longer had use of the car (like teenagers whose parents "take the car keys away"). Still 20-30% interest is a huge amount, and most people won't push their cars over a cliff to avoid letting a lender have it.
I think the real problem with the case cited, is that the lender DID get the car back, and somehow the former car owner still ended owing more than 5 times what she borrowed. And she doesn't sound like someone who played chicken with the repo man for several man. I think this lender is lending much to high a percentage of the cars' value and/or deliberately waiting until interest has accrued beyond the car's value before taking it. Sounds like his real business is using a secured loan to lure people into an unsecured loan (which is what his woman ended up with) which the borrower won't be able to pay, and then going after other assets by pushing borrowers into bankruptcy.
Tom Miller is a liberal.
'Car Title Loans' and 'Payday Cash' places weren't so common until riverboat gambling became the predominant savior of the public schools. I wonder what they really cost the states?
My gripe with the anti-loansharking laws, is that its a boon for organized crime, since, by organized crimes nature, they are going to avoid any kind of oversight.
When states pass usury laws, they wind creating a side underground loansharking business.
Its better to legalize usury and regulate then ban it all together or hassle or harras loaners out of doing business in the state.
Usury, or predatory lending or whatever, will always exist, and will one way or the other fill the vacume of the need for desired credit or loans.
How the state handles it, can either keep everything above board and protect the consumer while respecting their right to make a decision or, driving underground where criminal elements will thrive using it to fund other illegal enterprises and with no oversight.
Sure, the reason is simple. Many well-intentioned citizens are convinced government's role is to be everyone's mama.
It's much the sort of thinking that gave us Prohibition.
Some people cannot be trusted to make even simple decisions about ____________. Therefore, ____________ must be outlawed for the good of all.
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