Popular auto title loans offer fast cash at steep price
Posted December 15, 2012 in Press Releases
Laura A. Bischoff of the Dayton Daily News wrote this solid piece on auto-title lending in Ohio, drawing on her own investigation as well as our research on the issue. Our report on the issue shows that this new (in Ohio, at least) of payday-like lending is starting to catch on in Ohio. High fees and interest rates mean it may be even worse than "traditional" payday lending, and could cost consumers their cars if they default on the loan.
Long popular in states such as Texas and Illinois, auto title lending is spreading across Ohio with more than 20 stores in the Miami Valley alone. Lenders promise 30-day loans of $100 up to $10,000, using the title to the borrower’s vehicle as collateral.
An employee at a newly opened LoanMax store at 2601 S. Smithville Road in Dayton told an undercover Daily News reporter that someone taking out a $400 loan would have to pay back $536 after 30 days. On a $1,000 loan, a borrower would have to repay $1,325, the employee said.
If those fees and interest were calculated as an annual percentage rate, both loans would have an effective APR of around 400 percent.
According to the story, "In Texas, an average of 93 people a day have their cars repossessed by auto title lenders, which works out to be a 6 percent repossession rate, according to 2012 data from the Texas Office of Consumer Credit Commissioner."
“The payback time is extremely short and the interest rates are extremely high,” said David Rothstein of Policy Matters Ohio, a Cleveland-based left-leaning think tank. “And there is this new dimension: you could lose your car.”
Amy Voshall of Fairborn took out a $550 title loan this fall but claims the terms weren’t clear before she signed the paperwork. She signed the papers and now faces almost $1,400 in payments over six months. She has already missed one payment and is afraid she will lose the 1995 Chevy Blazer that gets her to school and takes her disabled son to doctor appointments.
“I was in a bind and I needed the help (to pay rent), and now I’m in a worse situation than I ever was,” she said.
Voshall planned to repay the loan when she received an adjustment to her disabled son’s Supplemental Security Income check. But she said she used that money instead to pay overdue utilities, rent and bills.
“It’s heartbreaking for me to look at my kids and say it’s a choice