ATLANTA JOURNAL CONSTITUTION
OUR OPINIONS: Entitlement groans
Legislators surely know that the title loan industry gives them money because it expects favorable laws
Tuesday, July 19, 2005
Someone ought to break the news to state Rep. James Mills (R-Gainesville) that there's no tooth fairy, reindeer can't really fly and industries don't donate hundreds of thousands of dollars to politicians without seeking something in return.
In the case of the title pawn industry, that something is a "no" vote on bills to rein in their abusive loan practices. Backed by the borrower's car, the typical title loan has a triple-digit annual interest rate, requires repayment within one month and is made for much less than the value of the vehicle. Lenders don't fret over whether the borrower has the ability to repay the loan since the car is their security.
The House and Senate failed to act on three bills that would have protected consumers this past session, agreeing only to hold hearings this summer and reconsider the bills next year.
As chairman of the House Banking Committee, Mills insists his vote on title loan legislation will not be swayed by the $10,000 in contributions the lenders bestowed on him after he spoke at their June convention. This year, the industry has given $120,000 to politicians, but Mills denies the money plays a role in the Legislature's decisions.
"Goodness, no," said Mills at a hearing last week on bills that would cap annual interest rates on title loans at 60 percent and require title lenders who repossess borrowers' cars to refund any cash left over after the vehicles are sold.
Of the two dozen states where title pawn loans remain legal, Georgia is alone in permitting lenders to retain all the proceeds from the sale of a repossessed car, even if the sale nets thousands more than the value of the loan. That suggests all those generous campaign contributions the industry has made did not go unnoticed or unappreciated by legislators.
What has gone unnoticed is the financial devastation that these loans wreak on Georgia's unsophisticated borrowers, including many young servicemen and women stationed at Georgia military bases. It's hard to believe that any legislator of conscience could defend loans that carry annual interest rates as high as 300 percent and strand borrowers without a car, endangering their livelihoods, but somehow Mills does.
"They're high-risk loans that no one else wants to make," he said. "Where else would these people go to get money to buy groceries or pay the light bill?"
Well, Rep. Mills, here's a few suggestions. Rather than assuming a title loan that creates a treadmill of debt, borrowers could negotiate a payment plan with the creditor, request an advance on their pay from their boss, join a credit union so they're eligible for low-interest loans, get overdraft protection for their checks or try to obtain a line of credit.
Of course, all those options differ from title pawns in one significant way: They don't make the lenders rich enough to buy themselves a whole lot of friends and defenders in the Georgia General Assembly.
> EQUAL TIME: For another perspective on this issue, see the next page, A13
EQUAL TIME: Title lenders fill a void in marketplace
John H. Thomas - For the Journal-Constitution
Tuesday, July 19, 2005
As reported in the Gainesville Times recently, a legislative committee holding hearings on whether to cut legally allowable title pawn interest rates by fivefold heard from satisfied customers happy to pay the admittedly high rates.
"My phone was cut off, I had no food, and my gas was cut off," one customer testified. "I took my title there and borrowed $250. I don't know what I would have done without it."
Another customer has three children, one of them critically ill. She works two jobs.
"When you can't pay your [utility] bill, they charge you a huge amount just to reconnect you. The title pawn companies have saved us repeatedly," she said.
Others told of how title pawn companies advanced the cash on their car titles, which allowed them to save their homes from foreclosure by the bank.
While Georgia already has the lowest workable title pawn rates in the United States, state Rep. Mary M. Oliver (D-Decatur) for a third time assaulted the industry with a bill that would effectively eliminate title pawns in Georgia. Both of her previous attempts failed to pass. Now here she goes again seeking to shut down a perfectly legal industry that provides a needed service for many Georgians.
Oliver wants to see a repeat of Florida and Kentucky, where rates were cut so severely the industry shut down. What's next? Government loans to Georgia's credit-challenged consumers?
Private business can fill marketplace needs --- especially if government regulation were removed, letting the natural competitive marketplace forces prevail. Change Georgia's antiquated lending laws that provide government protection to a select few. Allow an open-market system. Traditional lenders would move quickly to compete and the people of Georgia would benefit. Let us not forget one of the premises of our Founding Fathers --- less government is the best government.
> John H. Thomas is a lobbyist for the United Pawn Council of Georgia.
This column is solicited to provide another viewpoint to an AJC editorial published today.