Proposed bill would close loophole, putting restrictions on title pawn companies
New legislation at the State Capitol could place new restrictions on title pawn companies.
The companies offer up immediate cash and then charge sky-high interest rates on the loans.
Critics say the title pawn companies lock vulnerable Georgians into debt.
Under current Georgia law, there is no limit to how high an interest rate a title pawn company can charge.
Channel 2 consumer investigator Justin Gray found some charged as much as 100%, 200%, even 300%.
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But new bipartisan legislation could change that.
Eric Foster said he went to TitleMax at the start of the pandemic when his courier business dried up.
“We needed a little cash and we went to them,” Foster said.
Nearly two years later, he’s still working to pay what he thought would just be a short-term loan.
“Once I looked at the balance, I’m like, ‘Man, this balance is not moving, it’s not going anywhere,’” Foster said.
Title pawn businesses are exempt from Georgia laws that regulate lending.
Several years ago, Georgia outlawed payday lenders.
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“The fact that car titles get away by calling themselves a pawn and not a loan allows them to charge interest rates of 180%, even 300% in a way that traps Georgians in debt,” said Liz Coyle, consumer advocate with the nonprofit Georgia Watch.
Now, Georgia Republican Rep. Josh Bonner has introduced new legislation that would end the special loophole title pawn companies have in Georgia.
“What we have found is there is no entity and ability at the state level to regulate and provide oversite to protect the customers,” Bonner said. “We’re simply providing the framework to protect consumers in the state of Georgia when it comes to these types of loans.”
Bonner’s bill would hold title pawns to the same rules as other Georgia lenders and cap the amounts they can charge in interest.
One of the giants of the industry --TitleMax -- is based here in Georgia.
Just last week, the Consumer Financial Protection Bureau in a $15 million judgment, claimed TitleMax violated the Military Lending Act by charging sky-high interest to military families.
TitleMax said its business is a “high-quality service we provide to thousands of customers who rely on TitleMax as a reliable source of credit.”
“These are predatory lenders going after vulnerable Georgians,” Coyle said.
Gray tried contacting TitleMax for its thoughts on the bill, but so far, he has not gotten a response.
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