What Federal Pressure Might Mean for Title Loan Protection in Georgia.
2014 should have been a great year for Ron Laster. He and his wife had just bought a house.
Then he got hurt. And the same year, his boss died. He had been a touring musician with James Brown for 27 years. The Lasters called on loved ones for help as bills piled up, but mortgage payments were too high. It was then that they saw a television commercial.
“Georgia auto pawn, you know, where they say ‘get your money now.’ Cash! Help us pay your bills. ‘ Blah blah blah. This and that, you know, ”Laster said.
Laster said he and his wife knew there would be some interest. But they didn’t know it would be 300 percent.
“Maybe we misheard it,” he said. “Maybe we should have been a little more careful, but they were so eager for us to get the loan… we’re not going to lose this house.”
The original loan was $ 2,000. So far, the Lasters have paid the company over $ 6,000.
Car title lending companies receive hundreds of millions of dollars from Georgians every year. Consumer advocates say it’s a predatory industry. They are hoping that a federal rule, which has been in the works since last year, will change that. But that plan might not survive the Trump administration.
“The car is the warranty,” said Liz Coyle of consumer advocacy group Georgia Watch. “So if they don’t make the payments, the title lender takes their car, can charge them extra for repossessing the car, and then sell the car. “
There is also intense pressure from lenders. Laster said on bad days he gets up to four calls from the company.
“Some of them were really mean on the phone,” Laster said. “Remind me of the old crowd days – we’re going to break your leg – or something like that. They just break your pocket instead of your leg. This is what they do.
Its lender, Georgia Auto Loan, did not make anyone available for comment. There are over 400 lenders of similar titles in Georgia. Consumer advocates estimate they earn more than $ 199 million from state borrowers.
This is despite the fact that Georgia actually has one of the strictest rules in the country when it comes to another infamous loan product: payday loans.
“The securities lending industry is covered by a different section of the law than payday lending. It is the act of the pawnbroker. So the user protections that are in place for something like payday loans do not apply to securities lending, ”Coyle said.
She said she wasn’t saying no one should ever take out a title loan, just that companies should be explicit about what it could actually cost in the long run. Georgia has among the country’s largest population of people who do not use traditional banking services, more than one in 10, according to the Federal Deposit Insurance Corp.
Diane Standaert works with the Center for Responsible Lending. This group infiltrated loan offices and discovered that employees often did not provide details on the duration or cost of loans.
Standaert said federal regulators are working to change that.
“So in June of last year, the CFPB announced a proposed rule that has the potential to reign in the debt trap of car titles and payday loans,” she said.
The CFPB is the Consumer Finance Protection Bureau. The agency was created under the Dodd-Frank Act in response to the 2008 financial crisis.
The proposal would require lenders to make sure people are able to repay a loan without reducing other critical expenses.
But the CFPB itself is under attack. Texas Republican Representative Jeb Hensarling, who is leading the charge, argued the agency already has too much power.
“American consumers need competitive markets and a cop on the ground to protect them from fraud and deception, they don’t need Washington’s elites to trample on their freedom of choice and choose their financial products out of pocket. their place, “he said at a press conference. congressional scrutiny hearing from CFPB last month.
He wants to remove the director of the agency, restrict his executive powers and reduce his budget.
So it’s an open question of what might happen to this federal rule on securities lending.
Meanwhile, Ron Laster continues to try to pay off his debt. This is something he said he was too ashamed to reveal even to close family members.
“It’s really embarrassing, especially since you’ve been living this kind of life where you never had to worry about it, then all of a sudden – boom,” he said.
Recently he managed to get help. Another company took on its debt and let it start paying it off without the high interest. Even then, it took him over three years to get back to square one.