Some members of the state Senate in Virginia are poised to crack down on a portion of the lending industry that they believe to be predatory. This industry is the car title loan industry, and two of the leading companies in this industry are set to stop the use a legal loophole that previously allowed them to charge unlimited interest rate fees and to make loans last longer than one year. Members of the state’s Senate Commerce and Labor Committee say that this promise is sufficient for them, and this may very well put a stop to efforts that would have put new limits on how much these lenders could charge in addition to increasing the required reporting to be given to state regulators.
According to one senate member, Frank Wagner, “Let’s take the industry at their word, and if they are not doing what they are complying to do, I can assure you I’m going to support it and the bill will move forward.”
This deal was crafted by the Minority Leader in the Senate Dick Saslaw. He has been a vocal defender of the car title loan industry in Richmond. Consumer advocates who were pushing for the reform were hoping that this may turn out to be a year that is different, due to the fact that Saslaw was involved with recent efforts to stop car title lending companies from offering non-car title loans to the general public. As things panned out, however, Saslaw winded up striking a behind the scenes deal where two of the leading title loan companies officially promised to stop offering consumer loans.
Saslaw, who got about a quarter of a million dollars from the title loan industry over the past ten years said, “If any one of these different shops from a different company pops up in the next year, then when we come back here then I’m going to move forward,” says Saslaw, who has received about $250,000 from the industry in the last decade. “But I’ll take them at their word. But they’ve got to police their own industry.”
An Industry in the Midst of Controversy
Those who are critical of the car title lending industry believe that it is predatory towards lower income consumers. Because these lenders offer quick cash loans, with high interest rates fees, all for exchanging a title loan, lawmaker proceeded to put new laws in place about six years ago to “protect consumers” from car title lending companies. These laws put caps on interest rates and added monitors to the industry. The car title lending companies, however, have been able to get around regulations by giving consumer finance loans to people. These loans have allowed them to charge higher interest rates on loans that were given out for more than $2,500. But now that two of the larger lending companies that have been using the legal loopholes have officially pledged to stop making consumer finance loans, things seem to be settling down a bit. Though, it is fair to mention that other car title lenders could still decide to offer consumer finance loans if they wanted to.
Consumer advocate groups, politicians, car title lenders and even consumers will surely be watching to see how all of this pans out in the weeks and months to come. Short term lending companies have been under extreme scrutiny all across the United States in recent years, so it is not surprising to see this turn of events that has been going on for some time in the state of Virginia.