The predatory loan cycle of auto title lending


Fort Worth, TexasThe greed cycle of need for car title loans is far from new. In February 2015, the Star-Telegram (2/14/15) in Fort Worth reported that the average Texas resident was in debt by about $ 40,000. The car title loan was a quick and easy way for Texans to cope with short-term financial crises, such as a family emergency.

However, critics note that auto title loans represent some of the worst examples of predatory lending. The star telegram reported that in 2013, the most recent data available at the time, Texan consumers paid more than $ 360 million in interest and fees to vehicle title lending companies. This figure was up $ 53 million from the previous year, in 2012.

Mary Dixon, a resident of Mansfield, Texas, is a good example of the grief and financial hardship that came with the termination of an auto title loan. As reported in February 2015, Dixon suddenly found herself in need of quick cash to cover an unexpected family emergency.

A vehicle title loan turned out to be attractive, as Dixon had collateral in his 2007 Mercury Mountaineer, with the car title lending company asking few or no questions about unpaid bills, others. debts, credit rating, income or other aspects. their financial health, which would be a common request from a bank or other financial institution.

She borrowed nearly $ 3,000 on the equity she had in her car: $ 2,994.95, to be exact. A month later, she had paid a prepaid finance charge of over $ 300. In order to keep her car, she had to face a final lump sum payment of $ 3,351.28. If she didn’t pay, her car would be gone.

A similar situation was encountered by the plaintiff in a vehicle title loan lawsuit in New Jersey. Marjorie Moore had sued Capitol Title Loans and owner David Fischer in a class action lawsuit.

Moore’s story is compelling. The applicant’s car title loan with Capitol Title Loans was for a nominal amount of $ 3,000.00. The effective interest rate was 180.43%, a figure that industry watchers see as a classic example of predatory lending. The contract required Moore to repay $ 3,542.50 by Day 29, which would fall in January 2014 (the loan closed in December 2013). A fee of $ 85 was added for the lender to take a lien on Moore’s 2007 Toyota Camry from the New Jersey Motor Vehicle Commission because the loan was secured against the vehicle as collateral.

In this case, Moore defaulted after two payments. According to court documents, the vehicle was seized in January of the following year, 2015. If Moore had wished to recover his vehicle before the vehicle was sold to cover unpaid debts, his bill would be $ 8,733.25 to clear what was originally a $ 3,000 loan. . In addition, the amount would increase by $ 25 for each day the vehicle was stored.

The fees were broken down as follows: $ 3,085 for the principal balance owing, plus interest totaling $ 5,048.25, repossession fees in the amount of $ 575 and daily storage fees of $ 25 .

In December of that year, Moore launched a three-count car title loan class action lawsuit. At the center of the action were supposedly predatory interest rates, far exceeding the 30% per annum limit observed by the state.

His lawsuit was initially dismissed by a Somerset County Superior Court judge, ruling that Moore’s complaint did not fall within the jurisdictional bounds of small claims court as it was a well-founded class action lawsuit. on alleged violations of New Jersey laws.

Moore appealed. The New Jersey Appeal Division on February 13 of this year re-launched the vehicle title loan lawsuit.

The case is Marjorie Moore, on behalf of herself and others alike, c. David Fischer d / b / a Capitol Title Loans, case n ° A-3419-15T3, in the New Jersey Superior Court, Appeal Division.

In Texas, Dixon found a way to pay off the loan in full, including the excess loan interest.


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