Support legislation to protect Georgians from predatory loans

Georgia Watch supports the passage of legislation that protects Georgians from predatory, high-interest loans. To protect Georgians during this financially unstable time, the legislature should implement a 36% cap on all small-dollar loans, including car title loans.

Current Legislation: On January 28, 2020, Senator Randy Robertson (R – Cataula) introduced a bill that calls “title pawns” what they are – loans that should be subject to Georgia’s usury laws. Senate Bill 329, known as the Motor Vehicle Title Loan Act, would close legal loopholes that currently allow car titles to be “pawned” at interest rates as high as 300 percent. On March 3, SB 329 passed out of the Senate Finance Committee and advanced to the Senate Rules Committee. SB 329 is currently stuck in the Senate Rules Committee.

The bill would ensure that cash loaned in exchange for a car title is treated as a “loan” rather than a “pawn” and would bring title lending into compliance with current Georgia small-dollar lending industry standards. If the bill becomes law, title lenders will be regulated by the Georgia Department of Banking and Finance, which will level the playing field for Georgians by bringing uniformity to small-dollar loans across the state.

We urge the legislature to take steps to protect Georgians from high-interest car title loans during this uncertain time when many Georgians are feeling more cash-strapped than ever before. 

Why are high cost title loans a problem?

Amid the ongoing COVID-19 crisis, many Georgians may be feeling more cash-strapped than ever before and wondering how they’ll pay the rent or keep their lights on. More than likely, they’ve also seen a billboard sign from a company offering “Fast Cash!” car title loans. Many consumers turn to car title loans in times of crisis only to find out later that these small-dollar loans spell big trouble.

Small-dollar lenders prey on financially insecure consumers by providing high-interest quick cash loans that trap consumers in a cycle of debt. Georgia law caps most small consumer loans at an interest rate of 60% per year, but a legal loophole allows car titles to be “pawned” at interest rates as high as 300%, rates that would otherwise be considered usurious.

The Department of Defense (“DOD”) witnessed the harms of these high cost loans on military servicemembers and their families and enacted significant protections under the Military Lending Act. These protections do not extend to veterans and non-military Georgians. Recent polling revealed that Georgians want robust protections from these predatory loans. The poll specifically showed that 83% of Georgians statewide believe there should be a cap on the interest rates lenders can charge for these car title loans, while 73% of Georgians statewide believe lenders should be required to assess a borrower’s ability to repay before making a car title loan. We believe Georgia should follow in the DOD’s footsteps and protect all Georgians from these risky products.

Additional Resources:

Protect Consumers from Harmful Predatory Loans

Press Release: Sen. Randy Robertson Introduces Bill to Address Car Title Loans

WARNING: Georgians taking out high interest loans that could cost them their car

Car title loans face interest rate caps in Georgia Senate bill

Payday-Loan Fight Goes Bipartisan in States as CFPB Backs Off

Press Release: Title loan bill passes Senate Finance Committee