More auto title lenders are snagging unwary borrowers in cycle of debt - Los Angeles Times
Short-term lenders, seeking a detour around newly toughened restrictions on payday and other small loans, are pushing Americans to borrow more money than they often need by using their debt-free autos as collateral. So-called auto title loans — the motor vehicle version of a home equity loan — are growing rapidly in California and 24 other states where lax regulations have allowed them to flourish in recent years. "I look at title lending as legalized car thievery," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento advocacy group. "What they want to do is get you into a loan where you just keep paying, paying, paying, and at the end of the day, they take your car. She turned to one of a proliferating number of storefront title lenders, Allied Cash Advance, which promises to help "get the cash you need now. But Jordan said it wouldn't make a loan that small. Instead, it would lend her $2,600 at what she later would learn was the equivalent of 153% annual interest — as long as she put up her 2005 Buick Rendezvous sport utility vehicle as collateral. The key reason is that California has no limit on interest rates for consumer loans of more than $2,500, and it otherwise doesn't regulate auto title loans. Source: www.latimes.com
