The car title lending business in Virginia is thriving after changes in laws the past two years imposed new regulations on such lenders in many areas but allowed them to operate in the commonwealth.
Individuals who need cash but live in neighboring areas - such as Maryland, the District of Columbia and other nearby jurisdictions where laws capping interest rates have driven such lenders out of business - are seeking help in Virginia.
Last year, legislation sponsored by Sen. Richard L. Saslaw, D-Fairfax, ensured that car title lenders could extend credit to nonresidents. Since then, the number of licensed car title lenders has almost doubled in Virginia, along with complaints about high costs and collection tactics.
Car title loans - cash loans based on the equity in a vehicle - topped $125 million in Virginia in 2011, the first full year monitored by by the Virginia State Corporation Commission. While reforms by the General Assembly since 2008 have contributed to a two-thirds decline in the number of Virginia’s licensed payday lenders, the number of car title-lending outlets has more than doubled.
There were 184 locations operated by 15 state-licensed car title-lending companies at the end of 2010. A year later, there were 378 locations operated by 26 companies. The state regulator’s annual report also says 8,378 vehicles were seized.
But some are pushing back against the industry, such as West Virginia Attorney General Darrell McGraw. After investigating complaints from individuals who said debt collectors for Fast Auto Loans Inc. bothered them in the hospital and used other aggressive tactics,
Fast Auto Loans and its Atlanta-based parent, Community Loans of America Inc., denied wrongdoing and, in any case, ceased making loans to West Virginians a year ago, court papers say. Norman A. Googel, a West Virginia assistant attorney general handling the case, said his office is investigating additional Virginia car title lenders.
In a separate case in Roanoke County, Tracey M. Underwood sued Fast Auto Loans in federal court over an April 2011 loan. In court papers, Underwood says the firm illegally seized her 2001 Ford Taurus without providing required notice. Fast Auto Loans officials and the firm’s attorneys could not be reached for comment.
Consumer advocates view car title lending as a form of predatory lending because they can carry exorbitant interest rates. A typical 12-month car-title loan of $1,000, for example, can come with an effective annual interest rate of 250%.
