In January of this year, the state of New Hampshire passed a bill, contrary to the objection of the governor, which will allow car title loan companies to charge 25% interest each month. Governor Lynch expressed his concern that these excessive rates would harm family incomes, affect communities, and hurt the economy of the state. Congress established a 36% annual interest charge back in 2006 for loans towards military, which is also the current annual rate. Those who supported the bill made arguments that the car title loans are necessary to give more options to people who need short-term loans. The opponents warned that the loans would trap the consumer into high-interest loans which cannot be repaid.
January also proved busy for the state of California which made attempts to regulate car title loans, but failed. The bill targeted the title loan companies which loaned money at interest rates between 72 and 180 percent to those who have poor credit low income and need fast money. Currently, California does not cap the interest rate charged on loans of more than $2500. The supporters of this bill were hoping to require lenders to include additional disclosure which would educate the borrower of the total cost over the life of the loan. There were also hopes to ban the structure of car title loans as both sale and leaseback transaction. The opponents to this bill argued that limiting these loans would take options for fast money away from residents and that the high interest rates are necessary for these loans because the risk is all on the lender.
Illinois was another state which proposed limitations on interest rates charged by car title loan companies. The legislation was looking to regulate lenders to a 36 percent rate instead of the maximum rate of 300 percent. Borrowers who took out a $1000 loan end up repaying the loan plus $2000 in interest. Illinois borrowers paid more than $150 million in interest to car title lenders in 2011. The Illinois bill failed to pass on the argument that predatory lending laws were passed back in 2010 and there hadn't been enough time for those to work. The critics of car title loans argued that the loan rates were abusive, toxic and led borrowers into bankruptcy. Despite their efforts the bill failed to pass into law.
Predatory lending has been and will continue to have critics and supporters. Consumers are accustomed to having available options. Critics oppose the interest rates of car title loans as the demise of family budgets. The argument against the cost to repay the loan which creates hardships which could end up as a family losing their vehicle. Losing this valuable asset will create multiple problems with daily schedules. Arguments in support of the high risk loans are for the high interest loans as one more options a person has to get short-term loans. Either for or against, continued education efforts are needed to help people make better informed decisions when it comes to their money.
January also proved busy for the state of California which made attempts to regulate car title loans, but failed. The bill targeted the title loan companies which loaned money at interest rates between 72 and 180 percent to those who have poor credit low income and need fast money. Currently, California does not cap the interest rate charged on loans of more than $2500. The supporters of this bill were hoping to require lenders to include additional disclosure which would educate the borrower of the total cost over the life of the loan. There were also hopes to ban the structure of car title loans as both sale and leaseback transaction. The opponents to this bill argued that limiting these loans would take options for fast money away from residents and that the high interest rates are necessary for these loans because the risk is all on the lender.
Illinois was another state which proposed limitations on interest rates charged by car title loan companies. The legislation was looking to regulate lenders to a 36 percent rate instead of the maximum rate of 300 percent. Borrowers who took out a $1000 loan end up repaying the loan plus $2000 in interest. Illinois borrowers paid more than $150 million in interest to car title lenders in 2011. The Illinois bill failed to pass on the argument that predatory lending laws were passed back in 2010 and there hadn't been enough time for those to work. The critics of car title loans argued that the loan rates were abusive, toxic and led borrowers into bankruptcy. Despite their efforts the bill failed to pass into law.
Predatory lending has been and will continue to have critics and supporters. Consumers are accustomed to having available options. Critics oppose the interest rates of car title loans as the demise of family budgets. The argument against the cost to repay the loan which creates hardships which could end up as a family losing their vehicle. Losing this valuable asset will create multiple problems with daily schedules. Arguments in support of the high risk loans are for the high interest loans as one more options a person has to get short-term loans. Either for or against, continued education efforts are needed to help people make better informed decisions when it comes to their money.
