No job? No credit? No problem? That’s the motto of a powerful industry in Virginia that loans money based on automobile titles. Critics say the industry is predatory, but it has some very powerful friends in the General Assembly. 88.9 WCVE’s Michael Pope brings us the third and final installment of his series, Quick Cash, Toxic Debt.
(sound of television)
If you’ve watched much television, you’ve come across a commercial like this.
“Thanks, TitleMax. Thanks, TitleMax. Gracias, TitleMax.”
(jingle) “Get your title back with TitleMax.”
Lewis: “Yeah, it was like a real catchy jingle that you just couldn’t forget. I mean they have several. But one of them was so catchy I used to sing it over and over again in my head.”
That’s Lewis. We’re withholding his last name because he took a loan from TitleMax that he now says is predatory. He’s still working his way out of it, and it all started with that jingle.
(Lewis singing) “Get your title back with TitleMax.”
Car-title lenders say they offer an important service to people who would otherwise have a hard time getting a loan from a traditional bank. But critics say that jingle is misleading. You don’t get your title back. They take your title from you. And then maybe you get it back if you can make the payments. Lewis fell behind almost immediately.
Lewis: “The first payment came due, and I couldn’t even make the first payment. I remember that because I called them and told them that I couldn’t even make the first payment on the loan. And they said no problem. We’ll work with you. So they did something where they extended my loan, and from my understanding they weren’t supposed to do that.”
So what did TitleMax do wrong?
Dana Wiggins: “After he had missed a payment, they should have stopped charging interest 60 days after that point.”
That’s Dana Wiggins at the Virginia Poverty Law Center. She’s says she hears this same story over and over again, car-title lenders continuing to charge interest — even after the borrower missed a payment.
Wiggins: “Every time we get someone who calls us about a title loan, they have that exact issue.”
The people who get caught up in these loans don’t have many friends in Richmond. But the title lenders do. In the week before the General Assembly session began last year, title lenders gave $35,000 in campaign contributions even though the election ended back in November of the previous year. Like many businesses, title lenders make a habit of donating money after the election but before the beginning of session, when they are legally prohibited from giving.
Stephen Farnsworth: “They serve a very useful purpose for the business because it reminds people right at the start of the session who their friends are.”
That’s Stephen Farnsworth at the University of Mary Washington.
Farnsworth: “The coalition of people to block regulation may include some Democrats and some Republicans, and that’s why they are equal opportunity givers. Some money goes to Democrats and some goes to Republicans.”
Take, for example, the $15,000 contribution LoanMax gave to the Senate Democratic Caucus the day before the session began. A few days later, the Senate Democratic leader brokered a deal that involved two of the state’s leading title lenders voluntarily agreeing to stop offering multiple kinds of loans, an arrangement many considered a bait and switch. That deal ended up torpedoing all the reform bills.
Quentin Kidd: “It’s impossible to say that there was a quid pro quo. I mean, you just can’t say that.”
That’s Quentin Kidd at Christopher Newport University.
Kidd: “But it is possible to say that there was en effort on LoanMax’s part to gain access to elected officials so that their case could be heard.”
LoanMax certainly got a hearing from Senate Democratic Leader Dick Saslaw. He’s the one who negotiated that deal involving a voluntary agreement with two of the three leading title lenders in Virginia. LoanMax was not part of that deal, even though the company held a license to offer more than one kind of loan at one location in Alexandria. Saslaw says LoanMax isn’t the problem.
Dick Saslaw: “LoanMax doesn’t do that business. They don’t do it in the same facility. They’re the ones that called and alerted me to what was going on.”
Yeah. Well they have a license to do it.
Saslaw: “They don’t do it. End of discussion.”
That actually might be the end of the discussion because state regulators refuse to release information about how many cars LoanMax repossesses. Or how many loans TitleMax makes. State Senator Scott Surovell is part of a lawsuit suing the State Corporation Commission to make that information public.
Scott Surovell: “You know the law is the law, and if the law says you have to release the records you’ve got to release the records. I’ve never heard of a court before saying I’m not going to interpret the statute. I’m just going to call up the legislature and ask them to make a decision so I don’t have to make a decision.”
The State Corporation Commission has also declined to take action on removing that dual licensing authority that allows title lenders to offer to more than one kind of loan at their storefront locations, despite a specific request from Senator Saslaw and Senator Frank Wagner to do just that. Meanwhile, people like Lewis are living with the consequences of a system that allows these businesses to evade regulations lawmakers crafted to protect consumers.
Lewis: “I mean I lost everything. I lost my place. I didn’t have transportation again. I became homeless again, and I’ve been struggling with that issue ever since, Michael. Even up to this day.”
Lawmakers who are concerned about bait-and-switch might end up taking action to limit storefront locations to one kind of loan or another. A recent report from the State Corporation Commission shows five car-title lending companies currently also offering open-end lines of credit, an almost completely unregulated product. And five consumer-finance companies currently are also currently offering open-end lines of credit — that’s in addition to the other kinds of loans they offer, picking and choosing which rules they want to follow so they can maximize their profits at the expense of people who are already having a difficult time making ends meet.
For WCVE, I’m Michael Pope.