Introduce legislation to move regulation of car title lenders to the Department of Banking and Finance and additional consumer protections

Georgia Watch supports legislation to move car title lenders to the state Department of Banking and Finance subject to the state’s regulation on small dollar loans and additional consumer protections.

Many consumers turn to car title loans in times of crisis only to find out later that these small-dollar loans spell big trouble. These 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. To protect Georgians during this financially unstable time, the legislature should:

  • Move licensing and regulation of motor vehicle title lenders under the Department of Banking and Finance.
  • Close legal loopholes to ensure that cash loaned in exchange for a car title is treated as a “loan” rather than a “pawn”.
  • Bring title lending into compliance with current small-dollar loan standards.
  • Require lenders to return to the borrower any surplus obtained if the vehicle is repossessed and sold.

We support the passage of legislation that protects Georgians from predatory car title loans.


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