Monday, September 3, 2012

WV Ass't AG: “We’re Having A Border War Here With Virginia!” Issues Arise In Mid-Atlantic States Over Car Title Lending Racket

The Washington Post reports:

  • [V]irginia’s car title-lending business is booming, but consumer advocates say it’s nothing to celebrate. Since a change in Virginia law last year, the commonwealth has become a magnet for people who need cash but live in the District, Maryland or another neighboring jurisdiction where laws capping interest rates have effectively driven such lenders out of business.

    In 2010, Virginia lawmakers — led by Sen. Richard L. Saslaw (D-Fairfax), who received more campaign donations from the consumer finance industry than anyone else in the Virginia General Assembly — imposed new regulations on car-title lenders but allowed them to operate in the commonwealth.

    A year later, legislation sponsored by Saslaw ensured that car-title lenders could extend credit to nonresidents. Since then, the number of licensed car-title lenders has almost doubled in Virginia, along with complaints about high costs and collection tactics.

    But some are pushing back against the industry, including West Virginia’s attorney general and a Roanoke County borrower. After investigating complaints from people who said debt collectors for Fast Auto Loans Inc. pestered them in the hospital or used other aggressive tactics, West Virginia Attorney General Darrell V. McGraw Jr. sought to block the firm from writing new loans to West Virginians or seizing their cars, court documents say.

    Fast Auto Loans and its Atlanta-based parent, Community Loans of America Inc., denied wrongdoing and, in any case, ceased making loans to West Virginians a year ago, court papers say. Norman A. Googel, a West Virginia assistant attorney general handling the case, said his office is investigating additional Virginia car-title lenders.

    It’s really unbelievable,” Googel said. “We’re having a border war here with Virginia.”
  • 250 percent interest

    Consumer advocates view car-title lending as a form of predatory lending. Like short-term payday loans, car-title loans often carry exorbitant interest rates that trap people in a cycle of debt. A typical 12-month car-title loan of $1,000, for example, can come with an effective annual interest rate of 250 percent.

    Car-title loans may even be worse than payday loans, consumer advocates say, because borrowers risk losing their vehicles. That can put them at risk of losing their jobs, especially in rural or suburban areas with limited mass transit.

    Once you get in, it’s very hard to get out,” said Dana Wiggins, director of outreach and financial advocacy at the Virginia Poverty Law Center in Richmond.
  • Consumer advocates [] hammered Saslaw, saying he is too close to the industry. Between 2010 and 2012, Saslaw received nearly $73,000 in campaign donations from payday lenders, car-title lenders and consumer finance firms, according to records collected by the nonpartisan Virginia Public Access Project.

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