LADING

Millions In Campaign Contributions Enable The Title Loan Cycle Of Debt

The Title Loan Cycle Of Debt

It’s no secret that quick cash “too good to be true” loans perpetuate a vicious cycle of debt and poverty, particularly among the most financially vulnerable citizens; minorities, low-income families, the elderly, and the disabled. The loans are small-dollar and short-term, and they lure in borrowers who desperately need a source of emergency cash then saddle them with astronomically high interest.

But despite their frightening reputation, title loans are on the rise and thousands of borrowers have their cars taken away by title loan stores every year. So how are these predatory loan providers still in business?

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Although many states have taken steps to regulate the title loan industry or even have banned them completely, most states allow them to operate unchecked and unregulated. The reason why many states allow this nearly-criminal practice to continue is equally shocking: campaign contributions.

In a recent report released by the Center for Public Integrity, lawmakers and other officials are facing strong opposition when it comes to attempting to pass laws to regulate and limit the rise of title loan stores in order to keep state residents from being driven further into debt and sinking the state’s economy. On a state and national level, title loan stores are closely connected with large campaign contributions.

According to the report, about 150 bills to cap interest rates for title loan stores died in 20 state legislatures in 2011 alone after the title loan stores contributed millions of dollars in campaign funds. Now title loan providers have not only the power to take your car and drive you into debt… they’ve bought your state representatives, too.

The report says that in the past decade, three title lenders combined to provide $9.1 million in campaign contributions for prominent state and national lawmakers. You’ll recognize the names of some of the biggest donors: the operator of stores including LoanMax, Midwest Title Loans and more paid $4 million to campaign funds. TitleMax was the second biggest campaign contributor, providing $3.8 million. Community Loans of America, who owns Fast Auto Loans gave $1.3 million.

Many lawmakers who haven’t been bought off by the title loan industry are frustrated with the lack of progress being made in courts, and are angry at the people who are helping to uphold the cycle of loan-induced debt that’s plaguing lower- and middle-class Americans from title loans in San Francisco.

“It’s disgusting,” said Missouri Representative Tracy Creery. Creery introduced a bill this year to cap auto title loan interest rates at 36%. “The vast majority of the legislature is willing to look the other way on the need for reform.”

New Mexico’s Senator William P. Soules also introduced a bill in 2014 to restrict title loan interest rates at 36%. But the effort failed almost immediately, due to the heavy industry lobbying in New Mexico. “There’s big money being made off the very poorest and most vulnerable people in our state,” Sen. Soules lamented.

In the report conducted by the Center for Public Integrity, more than 46 states cited title loan providers for designing loans with a “scheduled monthly payment exceeding 50% of the obligor’s gross monthly income.” The title loan industry’s campaign contributions will continue unchecked, so the best course of action is to educate borrowers against the dangers of debt-inducing title loans.