RICHMOND, VA (WWBT) - The General Assembly has passed a bill to change title loans in Virginia. Title loans are high interest loans you can take out against your car. You'll still pay very high interest for a title loan, but the bill makes other changes that could help you pay it off sooner.
Title loans are usually loans for a few hundred to a few thousand dollars. Your car is your collateral. Annual interest is often more than 300%. And until now, Virginia has had no laws regulating them.
"We typically hear from people that borrowed a thousand dollars, they've paid back two or three thousand dollars, and they still owe the original thousand dollars and they're going to lose their car, or they've lost their car," said Jay Speer with the Virginia Poverty Law Center.
The General Assembly has passed a bill with the following proposed changes:
- loans will be limited to one year
- one loan per customer at a time
- the loan can't be for more than half your car's value
- you can't owe money on the car
- a lien has to be filed with DMV
- if your payments are more than 60 days late, lenders have to stop charging interest
- you must receive a notice before your car is repossessed or sold
- you cannot be charged storage fees
- no loans for military members or their families
- and violations can be reported to the Bureau of Financial Institutions or the Attorney General
"It's a good thing for consumers all in all, because it puts some of these restrictions in place," said Speer.
Some title lenders say they actually wanted regulations.
"You want to have consistency with your good business practices and a lot of the things in this legislation we are doing and those customer protections are there. So we have the expectations up front and the customer does as well," said Scott Johnson, representing Community Loans of America.
Interest on the loans would be limited to 22% per month for loans under $700, 18% per month on loans under $1400, and 15% percent on loans over $1400. But that's per month. Some consumer advocates say this bill doesn't go far enough.
"Although the law has improved, I would never advise anyone to get a car title loan. The interest rates are extraordinarily high," said Speer.
The new regulations could limit some business for title lenders. But they're pleased they'll be able to continue lending.
"A good group of our customers are individuals that are plumbers, carpenters, landscapers. They come to us to borrow money to do jobs and we certainly hope we can partner with them to help jump start our economy," Johnson said.
The bill is now on the Governor's desk. If he signs it, it will take effect July first.