More Auto Title Lenders Are Snagging Unwary Borrowers In Cycle Of Debt
by Jim Puzzanghera, Los Angeles Times
Cash-strapped consumers are being shown a new place to find money: their driveways.
Short-term lenders, seeking a detour around newly toughened restrictions on payday and other small loans, are pushing Americans to borrow more money than they often need by using their debt-free autos as collateral.
So-called auto title loans — the motor vehicle version of a home equity loan — are growing rapidly in California and 24 other states where lax regulations have allowed them to flourish in recent years.
Their hefty principal and high interest rates are creating another avenue that traps unwary consumers in a cycle of debt. For about 1 out of 9 borrowers, the loan ends with their vehicles being repossessed.
“I look at title lending as legalized car thievery,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento advocacy group. “What they want to do is get you into a loan where you just keep paying, paying, paying, and at the end of the day, they take your car.”
Jennifer Jordan in the Central Valley town of Lemoore, Calif., lived that financial nightmare, though a legal glitch later rescued her.
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