Bankruptcy

Georgia Consumer Should Avoid Car Title Loans

By Jonathan

Today's Atlanta Journal Constitution ran a front page article exposing the slimy underside to Georgia's Car Title Loan industry.  It turns out that Georgia has minimal regulation on car title lenders - who basically serve as a lender of last resort for desparate borrowers.

Georgia consumers learn the hard way that title loan borrowers literally risk the entire value of their vehicles when they take these loans.

The AJC article tells the story of a building contractor named Scott Oden, who pledged his wife's $13,000 Ford Expedition for a $2,000 loan.   Scott was unable to make the payments on time and the title loan store repossessed the vehicle.  When the vehicle was sold, however, the title lender kept all of the proceeds.   In other words if the vehicle generated $10,000 at auction, the title lender kept the entire $10,000 as Georgia law does not require the lender to refund to the borrower the difference between the loan balance and the sales price.

Needless to say the title loan law in Georgia makes it very profitable for title lenders to find a way to repossess and sell vehicles.   In Scott's case, he contends that a representative from the title lender promised him that he would have a chance to catch up the loan, but he discovered that this verbal promise was not kept.

A representative from the title loan industry argues that title loans are inherently risky and that most vehicles pledged are high mileage, low value vehicles that are often worth less after repo costs than the outstanding loan balance.

Perhaps - but does that not mean that high value vehicles with a lot of equity are especially attractive to title lenders who would like to see nothing better than a default.

Georgia legislator Rich Golick of Smyrna promises to introduce legislation in this year's General Assembly to end the repossession windfall provisions of current title pawn law.  Previous attempts by consumer friendly legislators have failed, although Georgia did manage to end payday lending in the State.

This reminds me of the promises to "work out a deal" made by mortgage lenders to frantic homeowners during the weeks prior to foreclosure Tuesday in Georgia.

So a couple of rules to keep in mind:

1. stay away from car title loans - the lender has a vested interest in your default and will say just about anything to cause a default

2. verbal promises are worth the paper they are written on

Full post as published by The BK Blawg on January 25, 2009 (boomark / email).