Bill to rein in car-title lenders clears House
By: William C. Flook
Examiner Staff Writer
March 9, 2010
Virginia's House on Monday voted overwhelmingly to put a new set of checks on high-interest "car title" lending, a bill that for the first time would create caps on interest rates and loan terms.
In a compromise between the industry and its harshest opponents, the House voted 96-2 to rein in what are now open-ended loans that use automobiles as collateral. The products have come under fire as preying on the poor and financially illiterate, who can lose their vehicles if they fall behind on payments.
The vote comes a year after a failed effort by state lawmakers to restrict car-title lenders and two years after the General Assembly cracked down on similarly controversial payday loans.
The bill originated in the Senate, which passed it last month. Modeled roughly on a similar law in Tennessee, the legislation would limit the loans to a year's length, shrink the pool of eligible borrowers, restrict the loan amount to half the car's value, and prevent new interest from being heaped on after a vehicle has been repossessed. It establishes a tiered interest rate cap that runs from 22 percent per-month for a loan smaller than $700, to a maximum 15 percent per month for higher than $1,400.
That still equates to triple-digit annual interest rates, said Del. Joe Morrissey, D-Henrico, who sought unsuccessfully to enact a far more stringent 36 percent annual limit.
"I think it's unconscionable that we would have an interest rate that high," he said on the House floor. "I think it's un-Christian."
Del. Terry Kilgore, R-Gate City, called the legislation "a carefully crafted compromise" that has the support of industry groups and consumer advocates. Each side said Monday it was nevertheless unhappy with individual provisions.
"Even though the interest rate is ridiculously high, it does a lot of other things which will help people," said Jay Speer, executive director of the Virginia Poverty Law Center.
Industry lobbyist Scott Johnson, who represents Community Loans of America, said it made "tremendous concessions" in the bill, but said it is preferable to no regulation.
"We always said we wanted to have a bill," he said. "We think hopefully, with all the concessions we made, this is something that strikes a balance."
Cracking down
Less than $700 22 percent per month From $700 to $1,400 18 percent per month Greater than $1,400 15 percent per month
