Do we need car title loans with 200% annual interest?
Michigan pawnbrokers are unlikely allies with advocates for low-income families to block proposed legislation that would allow some high-cost car title loans in Michigan.
A Senate bill, sponsored by outgoing Senate Majority Leader Randy Richardville, R-Monroe, would allow consumers to borrow money against their car titles, while keeping the car, and see charging a fee of 20% per month – or effectively an annual percentage rate of over 200%.
Unsurprisingly, many consumer groups claim that car title loans are predatory and exploit people who are already struggling to pay their bills. Borrowers may have bad credit and find “no credit check” advertisements appealing.
“People are going to go to these (loans) because they’re not getting credit anywhere else,” said Ross Yednock, program director for the Michigan Economic Impact Coalition, which works with individuals and groups committed to improving the economy. access to free tax preparation assistance. .
Michigan pawnshops say they oppose the bill, which would change existing pawnshop law.
Mark Aubrey, owner of Motor City Pawn Brokers and president of the Michigan Pawnbrokers Association, said, “We are actively fighting this in Lansing right now.”
He pointed out that pawnbrokers can now charge up to 3% per month, plus $1 per month or part of a month for storage, and don’t want to get into lending car titles.
“We don’t want to be in the same category as the incumbent lenders,” Aubrey said. “They are trying to incorporate securities lending into the Pawnbrokers Act.”
Amber McCann, spokeswoman for Richardville, said the bill would allow individuals to decide whether they want to use their vehicle as an asset for a loan.
Consumers who own their car and have clean title could get a loan through a pawnbroker under the bill.
She said Richardville has spoken to a number of stakeholders, including financial institutions and auto industry players, and is unaware of the opposition to the bill.
But consumer groups are reaching out to the media to halt any potential action in Lansing.
In Michigan, a company can make loans by placing a lien on the title of the automobile, but it is not allowed to take the title in exchange for the loan, said Andrea Miller, public information officer for the Michigan Department of Insurance and Financial Services. .
Contact Susan Tompor: 313-222-8876 or [email protected]