Proposed regulations for car-title loans draw fire

By David Ress, Richmond Times-Dispatch, Va.

Nov. 4--Payday lenders are complaining that proposed State Corporation Commission regulations on car-title loans will put an unfair crimp in their business.

But in filings with the commission over the past several days, consumer groups said the proposed regulations would prevent misleading practices common in loan offices and keep consumers from getting in over their heads and losing ownership of their cars.

Car-title loans are open-ended loans, basically lines of credit, secured by a vehicle.

The SCC proposal would:

--require borrowers turn over their car titles to the lender, so the title can be sent to the Department of Motor Vehicles to record the new credit line.

--bar lenders from using a car title to secure credit lines if the vehicle already secures another loan, such as the amount the owner borrowed to buy the vehicle.

--requires other loan businesses sharing space with a payday lender to comply with existing regulations on payday loans.

"Such a regulation is unnecessary and unduly burdensome," Tommy Moore, executive vice president of the Community Financial Services Association of America, a trade association for makers of small loans, wrote to the commission.

Carla Stone Witzel, an attorney for Cash-2-U Payday loans, said the regulations flout the legislature's intent in this year's effort to tighten rules for payday lenders.

She said the legislature specifically made clear that car-title loans were allowed.

Payday-loan companies and their association have contributed more than $1.3 million to Virginia politicians during the past five years and spent more than $160,000 lobbying the legislature last session, according to data collected by the Virginia Public Access Project and from the secretary of the commonwealth's office.

"Practical considerations need to be taken into account," Witzel said.

But the Virginia Poverty Law Center, a nonprofit group, said the proposed regulations would protect consumers.

"A borrower . . . should be fully aware that that he has given the lender a lien on his vehicle and that he may lose his vehicle if he doesn't repay the loan," the center's executive director, James W. Speer told the commission.

"This will not necessarily be clear to the borrower unless he is required to surrender his title."

Virginians Against Payday Loans, a lobbying group calling for tighter control of small, high-interest-rate loans, said state law requires that liens against a car be recorded on the title.

Banning car-title loans on cars already being financed "would reduce the opportunity for aggressive lenders to lure borrowers into loans which they are not capable of repaying," the group's lawyer, David W. Clarke, added.

But Patricia Dauterman, director of compliance at Approved Cash Advance, a lender, said car-title and payday loans are valuable to many Virginians who can't get credit or loans from mainstream banks.

She said her company is concerned that tightening rules on car-title loans will hurt Virginians. ------

Contact David Ress at (804) 649-6051 or dress@timesdispatch.com.

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