Millions of Americans have suffered job or income loss due to the coronavirus pandemic. If you are among them and are considering taking out a car pawn loan to help you meet your expenses, think carefully. Taking out a loan against the value of your car seems simple. Lenders give you money in exchange for the title to your car. But many borrowers complain about working like the legendary California Hotel. As the song explains, “You can check in whenever you want, but you can never leave.” Well, never is a strong word. You can possibly leave, but only after paying large sums of interest. What size ? You could pay $6,000 just to borrow $2,000,” said Liz Coyle, executive director of Georgia Watch, a statewide consumer advocacy group. The nonprofit has been fighting for more than a decade for greater regulation of short-term, high-interest loans. Borrowers who can’t keep up with payments on the common three-digit interest in the business can lose their car – often their only transportation to work, errands and medical care. “People are desperate. And that’s really the problem with this type of loan. It seems to be the business model of car title lenders to cluster around low-income communities, often communities of color. Often, access to traditional financial services, regular bank accounts or credit unions is limited. And so people will do desperate things and they’ll borrow more than they realize it’s going to cost them. Title lending companies recognize that they lend to high-risk borrowers with poorly established credit. However, consumer advocates say lenders fail to adequately explain the final cost of the loan. This month, the federal Consumer Financial Protection Bureau eliminated consumer protections against predatory payday and car title lenders. Coyle said it couldn’t have happened at a worse time because so many families are already struggling to cope. Georgia Watch is urging state and federal lawmakers to enact new regulations to protect consumers from high-interest securities lending. Generally, interest on small consumer loans in Georgia cannot exceed 60%. But these regulations do not cover loans involving car titles, which state law considers pledged items. short of money, contact your lenders. Many utility companies, for example, suspended disconnections during the pandemic. If you’re feeling overwhelmed, try contacting a nonprofit such as Consumer Credit Counseling Service of Savannah for help with budgeting. Do you have a question or have consumer issues? Email me here at WJCL-TV: [email protected]
SAVANNAH, Georgia (WJCL) —
Millions of Americans have suffered job or income loss due to the coronavirus pandemic. If you are among them and are considering taking out a car pawn loan to help you meet your expenses, think carefully.
Taking out a loan against the value of your car seems simple. Lenders give you money in exchange for the title to your car. But many borrowers complain about working like the legendary California Hotel. As the song explains, “You can check in whenever you want, but you can never leave.”
Well, never is a strong word. You can possibly leave, but only after paying large sums of interest.
Wide how?
“Currently, they charge between 187% and 300% annualized percentage, which makes it virtually impossible for people to pay off their title. You could pay $6,000 just to borrow $2,000,” said Liz Coyle, executive director of Georgia Watch, a statewide consumer advocacy group. The nonprofit organization has been fighting for more than a decade for greater regulation of short-term, high-interest securities lending.
Borrowers who cannot meet the triple-digit interest payments common in the business may lose their car – often their only means of transportation to work, shop and seek treatment.
“People are desperate. And that’s really the problem with this type of loan. It seems to be the business model of car title lenders to cluster around low-income communities, often communities of color. Often, access to traditional financial services, regular bank accounts or credit unions is limited. And so people will do desperate things and they will borrow more than they realize it will cost them.
Title lenders recognize that they lend to high-risk borrowers with poor credit. However, consumer advocates argue that lenders do not adequately explain the final cost of the loan.
Just this month, the federal Consumer Financial Protection Bureau eliminated consumer protections against predatory payday lenders and car title lenders. Coyle said it couldn’t have come at a worse time because so many families are already struggling to cope.
Georgia Watch is urging state and federal lawmakers to enact new regulations to protect consumers from high-interest home loans. Generally, interest on small consumer loans in Georgia cannot exceed 60%. But these regulations do not cover loans involving car titles, which state law considers pledged items.
“They should be regulated by the Department of Banking and Finance and they should be subject to the state usury cap,” she said.
If you are short of money, contact your lenders. Many utility companies, for example, suspended disconnections during the pandemic. If you’re feeling overwhelmed, try contacting a nonprofit like Consumer Credit Counseling Service of Savannah for help with budgeting.
Do you have a question or a consumption problem? Email me here at WJCL-TV: [email protected]
