Tennessee Families Lose $226 Million a Year to Car Title Lenders
The Consumer Financial Protection Bureau’s latest report underscores the need for a strong, national rule that reins in the worst abuses of payday and car title lending, said Andy Spears, executive director of Tennessee Citizen Action.
The CFPB’s report released today found car title loans, on average, carry a 300% annual percentage rate. The report also found that 80% of loans were made on the same day as an old loan was repaid, and eventually one in five people had their cars seized by the lender.
“This report demonstrates the devastating impact of car title lending on Tennessee families,” Spears said. “It’s a system purposefully rigged against the borrower from the beginning and one that inevitably turns a tough financial situation into an endless cycle of debt.”
According to the Center for Responsible Lending, car title loans drain $226,638,410 in fees annually from Tennessee families.
Tennessee Citizen Action is part of a nationwide campaign to Stop the Debt Trap, which includes a call for the CFPB to issue a strong national rule to prevent these types of abusive lending practices.
“The basis for a strong rule must be an airtight standard that requires lenders to determine whether a borrower will likely be able to pay back the loan, according to its original terms, without re-borrowing and without defaulting on other basic necessities, like rent, utilities or food,” Spears said. “To be meaningful, this affordability standard must set up a reasonable test for determining the expenses a borrower is likely to encounter over the term of the loan and must ensure that any standard is truly based on the borrowers’ ability to repay – not the lenders’ ability to collect.”
For more on efforts to protect consumers from legalized loan sharks, follow @TNCitizenAction