Speaking Out Against Car Title Loans

Car title lending often goes under the radar, and some people have probably never even heard of it.  But it’s some of the most abusive lending around.

Title lenders give out small loans and hold car titles (and sometimes keys) as collateral. If the borrower misses or is late on a payment, they come and take the car.

Like payday lending, these loans are designed to trap borrowers in debt.  Borrowers often end up paying two or three times as much as they’ve borrowed because of exorbitant interest and fees, and they can also end up losing the family car.

Recently, two people have spoken out about car title lending on AFFIL’s Share Your Story page.  One is a borrower, and the other a former employee of a car title lending shop who eventually quit because she felt too “dirty” about the job.  Her reflections are poingnant:

My position as Title Manager proved to be the most difficult job that I have ever held. The company I worked for was based out of another state, therefore, it was not as personal for them as it was for me. It was MY hometown and MY people that I have known my entire life who filed into that office wanting to do loans because they trusted ME…

One case in particular made me draw the line. I had a customer who had pawned his title for 1,200.00 dollars in 2005. He had called me in June of 2010 to report that he had fallen into financial problems and was unable to continue paying on the vehicle. When I discovered that not only did he always pay on time but had already paid over 6,000 dollars back in interest alone I told him that I would speak with my supervisor. I was floored when my supervisor instructed that our “deal” was for him to pay us $800.00 in 30 days to get his title back, a day over 30 days, she said, would void out the deal and he would have to bring us his car. This customer was an old veteran and on disability and I knew he would not be able to come up with that kind of money that quick. I also think SHE knew it too.

Auto title lending is technically illegal in most states, but lenders often find ways around the law.  Consumer advocates are hopeful that the  Consumer Financial Protection Bureau – which Congress will hopefully create next week after the July 4 recess – will crack down on these irresponsible and abusive lenders.