High interest rates result in repossessed cars, lawmakers discuss regulation

Bipartisan support grows to regulate the title pawn industry
Published: Mar. 3, 2023 at 5:50 PM EST
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ATLANTA, Ga. (Atlanta News First) - Loans with a 300% interest rate? It sounds unbelievable, but that’s what’s happening across Georgia, and many residents are losing ownership of their vehicles because of it.

I’m sure you’ve seen the commercials, companies offering you cash on the spot as a loan, holding the title of your car as collateral. The length of these loans is usually 30 days.

Atlanta News First received an email from a viewer saying she is trapped in a title pawn and will lose her car if she doesn’t pay up. The woman did not want to be identified but said she pawned her title at a well-known chain. Her annual interest rate is 152%.

Her lender provided $8,517. The money is gone, and the woman says the title pawn company wants to repossess the car.

The consumer advocacy group Georgia Watch says that high-interest rate is unacceptable.

“Here’s what’s completely wrong with that argument from car title lenders. There is no risk. The loan is collateralized by a car, so they really don’t need to charge such high-interest rates,” said Liz Coyle, Executive Director of Georgia Watch.

Coyle says 18-20% of people who pawn their titles lose their cars.

According to current state law, a pawnbroker has to notify you of in a written statement, “Failure to make your payment as described in this document can result in the loss of your motor vehicle. The pawnbroker can also charge you certain fees if he or she actually repossesses the vehicle.”

Once your car is repossessed, you could be responsible for the cost of repossessing it, storage fees, and “any other fees for the handling of the car,” according to Georgia Legal Aid.

“Certainly, their business model is they loan an amount at a rate, knowing what the borrower’s fixed income is, knowing the borrower won’t be able to pay off the loan at the end of thirty days,” Coyle said.

Georgia Watch has been trying to get state lawmakers to regulate the title pawn industry for years. But this year, Georgia Representative Josh Bonner introduced House Bill 342 to protect consumers from unregulated car loans. It would require oversight by the state’s banking and finance committee and cap the title pawns at 60%.

READ | HB 342 at the bottom of this story

Bonner, head of the state’s defense and veterans affairs committee, says the Department of Defense already protects servicemembers from interest rates above 36 percent.

The state house may vote Monday to get the bill crossed over to the state senate, but even if it doesn’t, the bill will transfer to next year’s senate agenda.

The Georgia Attorney General’s Consumer Protection Division says you should never pawn your title. They provide these helpful steps to take before resulting to this drastic step:

  • Shop wisely among the offerings in the marketplace.
  • Look for the lowest interest rate from a bank or credit union.
  • Consider a loan from family or friends.
  • Ask your present creditors about reducing your interest rate.
  • Maintain a bank account with overdraft protection for some degree of security.
  • Make a budget.
  • If you need help with a budget or see no way to pay your bills, consult a legitimate consumer credit counseling service.