BY CATHY JETT
Vehicle-title loan companies began cropping up in Virginia back in the 1990s.
They appeal to customers who either don't qualify for credit elsewhere, or need a small amount of money quickly due to an emergency.
Several states have outlawed such businesses, and Virginia's attorney general's office has filed five actions against seven vehicle-title lenders, said Dave Irvin, senior assistant attorney general.
One of the first to settle was Loan Max, a national company which also goes by Anderson Financial Services and LoanSmart. It has four offices in the Fredericksburg area and about 40 statewide.
The attorney general's office found that from October 2004 through November 2005, Loan Max typically charged its borrowers loan fees and interest rates that exceeded statutory limits.
"The law that we used there was the Consumer Finance Act, which is part of the Virginia Small Loan Law, the same law that was used in all of these actions against title lenders," said Irvin. "That law prohibits lenders who are making small loans to charge more than 12 percent interest a year unless they're licensed or otherwise exempt from the statute."
Loan Max agreed in 2007 to refund more than $206,000 to nearly 1,800 borrowers for cash advance fees paid on loans paid in full during the first two billing cycles, among other things.
Today, Loan Max is "absolutely legal in Virginia," said spokeswoman Osjha Anderson. "The attorney general's office has looked us over very good. We'd stopped charging the cash-advance fee in 2005 before the attorney general's office brought it to our attention."
Loan Max, like other vehicle-title loan companies in Virginia, also now offer open-end credit, which exempts them from the state's 12 percent interest cap. That means there is no set due date for loans, and lenders can't charge interest for the first 25 days of the loan.
Anderson said Loan Max is upfront about how much interest it charges customers--typically an annual rate of 300 percent, and doesn't repossesses vehicles unless a customer is significantly behind on payments and has received a written notice.
If the vehicle brings less at auction than is owed, the company does not seek the difference, she said, although Aarian Dodson, a Spotsylvania County customer, said she was told differently at the Loan Max office in Fredericksburg.
Anderson offered to contact Dodson and work out a payment schedule. "We're always willing to work with customers," she said.
Virginia does not regulate vehicle-title loan companies, although attempts to pass bills to do so were made in the past two legislative sessions.
"If we don't have licensure authority, there's nothing we can do," said Ken Schrad, spokesman for the State Corporation Commission. "We don't regulate that industry."
Nationwide, vehicle-title lenders are making generous campaign contributions, and some states have passed legislation favorable to their industry. In Virginia, Anderson Financial Services has made $73,000 in campaign contributions this year.
These include $15,000 to the Democratic Party's Commonwealth Victory Fund, $10,000 to the Republican Party's Virginia House Campaign Committee and, locally, $1,000 to the re-election campaign for Del. Mark Cole, R-Spotsylvania, according to the non-profit Virginia Public Access Project.
Cathy Jett: 540/374-5407
Email: cjett@freelancestar.com