Group targets bill to fight predatory lending

Title loan businesses can charge exorbitant annual interest rates, which may explain why there are so many in McMinnville. An anti-predatory lending group is hoping the General Assembly considers legislation to ease the interest rates.

In addition to the proposed bill, at least three plaintiffs have been named in a Shelby County Circuit Court lawsuit Memphis Area Legal Services hopes will help reform practices among Tennessee?s car title pledge lenders.

?It?s an industry that really preys on desperate people,? said Legal Services attorney Webb Brewer. ?They?ve got to come up with $220 every month just to keep from losing their car.?

Anita Gray, one of the plaintiffs in the suit filed Wednesday, was out of work after an auto accident and needed cash to pay her bills. She pawned her car to Golden Title Loans, where repayment rates reach 264 percent a year.

Borrowing $1,000, Gray paid Golden Title more than $4,000 over the next 18 months ? more than she’d paid to buy her used 1997 Saturn. And still she owed $1,200. The principal never went down despite paying $220 a month, in addition to late fees and other penalties.

?They?re ripping people off,? said Gray, who is suing the Memphis-based Golden Title.

Golden Title owner Doug Golden said his firm operates legally and ethically, but he wouldn?t discuss the lawsuit. Car title lenders say they provide a service to people who otherwise would find it nearly impossible to borrow.

Under state law, car title lenders can charge monthly fees of 2 percent interest and a 20 percent administration fee when a borrower pledges the title of an automobile as collateral.

The bill sponsored by state Sen. Roy Herron, D-Dresden, and Rep. Larry Turner, D-Memphis, would limit the 20 percent administration fee to the first month.

After that, lenders could charge only the 2 percent interest a month, and after three months, a portion of what the borrower pays would be applied to lower the loan principal. Herron also has filed a bill this session that would limit the number of months a title pledge loan can be rolled over.

?They?re aimed at curing the same injustices,? he said. ?And too many injustices have been committed.?

In the suit filed Wednesday, Legal Services lawyers contend late fees and call-off fees charged to Gray and others are illegal because they exceed the 22 percent-a-month cap. Golden Title also is violating the Tennessee Consumer Protection Act by engaging in unfair and deceptive acts, the suit alleges.