Iowa Senate OKs title loan restrictions

Iowa Senate OKs title loan restrictions

	Published : Tue, 20 Mar 2007 16:55 By : Agencies Print this Story

DES MOINES, Iowa (AP) - The Senate has approved new restrictions on car title loans, a move supporters say could protect borrowers from high interest rates and eventual car seizure.

The measure, which goes to Gov. Chet Culver, would limit annual interest rates to 21 percent on car title loans, down from the current 300 percent.

The Senate approved the bill 32-16 on Monday, rejecting warnings from industry officials that the restrictions would force the industry from the state.

'Car title loans are the most abusive predatory lending in the state,' said Sen. Joe Bolkcom, D-Iowa City.

He also rejected arguments that the measure would close the only available credit option for the working poor.

'Wrecking someone's credit is not a service,' Bolkcom said.

Sen. Matt McCoy, D-Des Moines, sought to weaken the measure by allowing the higher interest rates but requiring lenders to post a notice alerting borrowers to the risk they are taking.

'What we are trying to ask in all cases that the buyer beware, that the borrower beware,' McCoy said.

McCoy warned that lawmakers weren't closing down an industry, because car title loans are available on the Internet.

'I could get a car title loan in about a minute,' he said.

Critics, including Attorney General Tom Miller, have pushed the Legislature to tighten the restrictions on car title loans.

Under a typical car title loan, the borrower hands over the title to the car and a set of keys as collateral. Typically, there is no credit check to see if the borrower can repay the loans, and interest rates are high with payments due almost immediately.

A missed payment means a car is seized and then sold.

Bolkcom said that can destroy the financial life of the working poor because they have no way to get to work.

McCoy said there's little lawmakers can do to protect people who are unwise with their money.

'You can go out to Prairie Meadows (casino) and see that they are going to manage to screw up their lives,' McCoy said.