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Various groups fight for legislative action against car title loans.
BY SUSANNAH CLARK
Car title loans will be getting attention at the General Assembly's upcoming session, as various faith-based and anti-poverty organizations have spoken out against lenders' excessive interest rates.
Del. Joe Morrisey, D-Henrico, is drafting a bill that would cap the annual interest rates of car title loans at 36 percent. Currently, most car title lenders have an interest rate of 25 percent to 30 percent per month, which amounts to an annual percentage rate of 300 percent to 360 percent.
"I think it's disappointing that these business are still able to take advantage of people in the commonwealth," Morrisey said. "I say it's unseemly. Others would uses a stronger word."
Fredericksburg resident Jeff Jones agrees. Clad in a bright-yellow life jacket, Jones spent last Friday afternoon flagging down cars next to the parking lot of Cashpoint Car Title Loans on State Route 3 to pass out fliers.
"What these businesses are doing is reprehensible," Jones said, referring to the high interest rates and misleading advertising. "They're targeting vulnerable people."
While Jones is a minister at the Unitarian Universalist Fellowship of Fredericksbrg, he said he is speaking as an individual, and not for the congregation.
Along with Jones, other representatives from the Virginia Partnership to Encourage Responsible Lending passed out fliers outside 10 car title lenders in seven cities on Friday, warning of the financial dangers of car title loans. They all wore bright-yellow life jackets.
The Virginia Partnership to Encourage Responsible Lending is a coalition of non-profits, including the Virginia Interfaith Center and the Virginia Poverty Law Center. Along with educating the public about high interest loans, the organization is also currently urging the General Assembly to amend the Consumer Finance Act so that it applies to car title lenders.
The Consumer Finance Act caps interest on small loans (under $2,500) at 12 percent annual percentage rate.
Currently, most car title lenders are exempt from the cap because they offer open-end credit.
While Del. Morrisey is drafting a separate bill for car title loans, the coalition is also advocating for payday lenders to be regulated by the Consumer Finance Act as well.
In 2002, the General Assembly passed the Payday Loan Act, which exempts payday lenders from most small loan regulations.
Since June 2007, Attorney General Bob McDonnell has successfully negotiated five settlements with seven automobile title lenders who have violated the open end credit policy. The settlements have provided $458,932.07 in refunds to 2,669 car title loan customers.
Spokesman David Clement-son said that the office of the attorney general is still constructing their legislative agenda for the upcoming session, and could not release any details yet.
Latonya Reed, policy analyst for the Virginia Interfaith Center, called car title loans a form of "predatory loaning."
"Car title loaning companies put out aggressive advertising that prompts people in financial stress to seek them out," Reed said. "It's about usury. The interest rates are truly excessive and and people fall into a hole."
Susannah Clark: 540/374-5000, ext. 5617