How Title Lenders Trap Poor Americans in Debt With Triple-Digit Interest Rates

How Title Lenders Trap Poor Americans in Debt With Triple-Digit Interest Rates

Max Pawn Term Open-ended
Max Interest Rate 187.5% annually
Max Pawn Amount No limit
Repossession Rules If vehicle is sold for more than the debt, the lender keeps all proceeds; if sold for less, lender cannot pursue any remaining balance

Nevada

Medium Restrictions

Max Loan Term 210 days, including any extensions
Max Interest Rate No limit, but must consider the borrower’s ability to repay the loan
Max Loan Amount Value of the car
Repossession Rules If vehicle is sold for more than the debt, the lender must return any surplus; if sold for less, lender cannot pursue any remaining balance

Illinois

High Restrictions

Max Loan Term 181 months
Max Interest Rate 36% APR, monthly payments cannot exceed 22.5% of the borrower’s gross monthly income
Max Loan Amount $40,000
Repossession Rules If vehicle is sold for more than the debt, the lender must return any surplus; if sold for less, lender can pursue remaining balance


Credit:
Graphic by Anna Donlan. Source: Georgia Pawnbroker Act, Nevada Revised Statutes, Illinois Compiled Statutes, Illinois Administrative Code

The increased regulations coincide with a growing body of evidence about the harm that subprime lenders like title-lending companies have on local communities and economies.

Illinois’s path to regulating the industry is instructive. In 2012, when TMX Finance executives identified the state as a growth market, regulators were already putting into place rules that mandated reporting from subprime lenders like title-lending companies working in the state.

In 2020, Illinois church groups and state lawmakers reviewed nearly a decade’s worth of data and became alarmed. High interest rates and fees charged by title lenders were exacerbating pockets of poverty, especially in minority neighborhoods, according to Brent Adams, the then-state official who helped devise the reporting regulations. Individual families were more indebted, and fees they paid were largely going to out-of-state lenders, leaving less money to be spent in local businesses. Moreover, customers who couldn’t keep up with their payments to title lenders would lose a working family’s most important asset: their vehicle. Without a car, a parent could be unable to hold down a job or get children to doctors or school, he said.

“It is difficult to craft a data argument for these products. Practically everyone you talk to pays three times the amount of the loan to get out of a title loan,” said Adams, who is now senior vice-president for policy and communications for the Woodstock Institute, an Illinois-based economic think tank. “Some people will say they had a good experience, but the percentage of people who report an abusive relationship with title lenders is so much higher. The disparities are extreme.”

In early 2021, the Illinois legislature passed a 36% interest rate cap, dismissing arguments from TitleMax and its industry that such a move would put them out of business. That year, TMX Finance stopped making new loans in the state. Virginia and California passed similar interest rate caps, moves that led TitleMax to close operations in those states as well, according to state officials and the company’s website.

A similar attempt in Georgia in 2020 died after TMX Finance’s then-chief legal officer testified at a state senate committee hearing that TitleMax needed to charge high interest rates given the risk profile of its customers. State senators did not press the company for more detail, nor did any senator offer up dissenting data.

Over the last 16 years, at least five attempts in Georgia to pass legislation regulating interest rates charged by title lenders or reclassify them under financial lending rules have wilted under industry pushback. TitleMax, for one, says strict interest rate caps would endanger the approximately 700 jobs the company provides to Georgians.


Tameka Rivers, a middle-aged Black woman who lives in east Savannah, has been paying off a TitleMax pawn for more than two years. Rivers said she was desperate for $2,000 back in 2019 to help her adult daughter, who was expecting a baby and needed a place to live. A single mother working two jobs to provide for an extended family, Jones didn’t have savings to help provide her daughter with a security deposit for her apartment lease. She also didn’t have relatives she could rely on for help.

Rivers remembered hearing TitleMax’s signature advertisement on the radio: “Get your title back with TitleMax,” goes the catchy jingle. That was enough for her to drive over to the TitleMax store on Skidaway Road, a mile from Georgia’s oldest historically Black university, to see if they could help.

“It seemed straightforward enough at the time,” Rivers said. “They didn’t ask me a lot of questions about my life, and, boy, we needed the cash.”

«I Got My Title Back with TitleMax»

Tameka Rivers recalled the TitleMax jingle before driving to a company location to get a title pawn.


Credit:
Source: TitleMax’s YouTube Channel

Consumer advocates in Georgia have long argued that struggling families like Rivers’ deserve better financial options than the one TitleMax and its industry offer. Yet revealing the scope of the impact title lenders have on these families is challenging because of the lack of public data on the industry.

The Current and ProPublica identified roughly 500 title pawn stores, which span the majority of Georgia’s 159 counties, including at least a dozen locations in Atlanta and Savannah, as well as in rural areas in and around Ellijay and Vidalia.

Georgia does not officially track the number of title pawns issued by these stores. The analysis of the records of vehicle liens placed by these companies reveals new title pawns for roughly 75,000 vehicles per year since mid-2019, when the state implemented a new system for tracking vehicle ownership information. That figure is likely an underestimate of the total number of title pawns, since the analysis does not include repeat customers.

The industry is thriving at a time when the number of traditional banking locations in Georgia has declined by 22% in the last decade, according to the Federal Deposit Insurance Corporation. A 2021 FDIC survey found that 6.7% of Georgians lack bank accounts. That statistic is roughly twice as high — 13.3% — for Black households.

Title lenders are disproportionately located in communities of color and low-income areas, according to an analysis by The Current and ProPublica. Roughly three-quarters are in ZIP codes with incomes below the state’s median income.

Title Lenders Cluster in Disadvantaged Communities

Title lenders are less common in ZIP codes with more white residents or more high-income residents.


8 title lending locations per 100k residents

Household income less

than $30k


Credit:
Source: Georgia Department of Revenue; Google Maps; company websites; 2020 5-year American Community Survey

But the industry’s impact on these communities isn’t captured fully by where they have storefronts. Equally crucial is how many months customers continue to pay, according to current and former industry officials.

Back in 2009, then-TMX Finance President John Robinson explained to the company’s creditors that repeat customer fee payments were the crux of TitleMax’s business plan. We “recover in excess of 100% of the face value of the Customer Loans,” he wrote in an affidavit. “The average thirty (30) day loan is typically renewed approximately eight (8) times, providing significant additional interest payments.”

Rivers told The Current and ProPublica that she wasn’t offered a formula describing how she would pay off her pawn. Instead, she said, the store manager emphasized the relatively low monthly payments of $249. Rivers said she doesn’t recall anyone explaining the difference between a payment that covered interest and one that included paying down her principal. After the manager talked through the monthly payment, she signed a contract on the store’s digital tablet. She had access to her data via a company app, which also allowed her to make payments electronically. But she rarely used the app and generally paid her monthly payments in cash.

Ten months later, after Rivers had paid TitleMax more than the $2,000 she had borrowed, Rivers talked to the manager who had set up her contract. That’s when she realized that she had only been paying interest and still owed the original pawn amount.

When Rivers complained about feeling deceived and asked for help working out a repayment plan to get out of debt, TitleMax wasn’t willing to help, she said.

District directors have the authority to rewrite contracts, but rarely do, according to two former managers who worked in Savannah and Columbus and who requested anonymity to speak about internal company procedures.

In October, Rivers’ daughter went to the hospital for a cesarean section, and now Rivers is helping care for a newborn, as well as four other grandchildren, while trying to juggle vocational school courses. She doesn’t know where she’s going to scrape together money to get rid of the TitleMax debt, she said.


Consumers who feel taken advantage of by title lenders in Georgia have a very narrow avenue for pursuing their complaints.

The CFPB, the federal agency created to protect consumers from big financial organizations in the wake of the 2008 global financial crisis, launched its investigation into TMX Finance, in part, due to consumer complaints amassed by Georgia Watch, the state’s most prominent consumer advocate. The company denied any wrongdoing, but the CFPB ruled in 2016 that it had deceived customers in Georgia, Alabama and Tennessee by masking the true cost of title loans. This did not impact individual cases, however, and the company’s $9 million fine was not paid out as restitution for individuals, instead going into an agency-controlled fund.

At the state level, the website for the Consumer Protection Division of the Georgia Attorney General’s Office has a whole page devoted to title pawns — but it is not directly linked from its homepage.

On that page, the agency categorizes title lenders as a fringe banking product similar to a “payday loan,” a product illegal in Georgia. It recommends that Georgians in need of emergency finance consider multiple alternatives, such as asking a relative for money or approaching a credit union, before turning to subprime financial products like title pawns.

For those who don’t find alternatives, the agency’s website offers straightforward guidance: If customers think their title lender violated the law, they “should notify the local criminal authorities for the city or county in which the title pawn company is doing business.”

Outside of metro Atlanta, few law enforcement bodies across Georgia’s 159 counties have robust white-collar or financial crime department or an investigator specialized in such crimes. LaGrange Police Chief Louis Dekmar, who has led the northwest Georgia department for nearly 30 years, said he doesn’t know of any local district attorneys who have filed charges against title lenders. The probability of that happening is slim, according to Dekmar and two other veteran Georgia police officials. Title pawn customers who may be victims “generally don’t know how to report something like that,” said Dekmar, a former president of the International Association of Chiefs of Police.

Meanwhile, the state attorney general’s office has not investigated TitleMax, despite the CFPB findings of abusive practices and that agency’s ongoing investigation, according to an official in the office.

The attorney general’s office has taken action against two other title lenders. In 2017, it settled with a TitleMax rival, Tennessee-based First American Title Lending of Georgia, for more than $220,000 to resolve allegations that the company had threatened individuals who were delinquent in repayments with criminal arrest warrants and by marketing its products as “loans” instead of “pawn transactions.” In the settlement, First American admitted no wrongdoing.

In 2018, the attorney general’s office reached a settlement with Georgia-based title-lending company Complete Cash Holdings and its owner Kent Popham, who agreed to pay a total of $35,000 “in response to allegations that it engaged in unlawful practices” against customers who had defaulted on their title pawn contracts. The company earlier denied wrongdoing.

“Consumers who seek out title pawns are already in financial straits,” Attorney General Chris Carr said in a press statement at the time. “Our office is committed to protecting vulnerable consumers from companies that try to take advantage of them through illegal actions.”

On other occasions, however, Carr’s office did not act. For instance, a testy five-year civil lawsuit in Fulton County Superior Court between TitleMax and subsidiaries of Alpharetta-based Select Management Resources surfaced a number of allegations of illegal behavior, including bribery and stealing customer information. TitleMax denied the allegations, and the two sides ultimately settled and moved to dismiss all allegations with prejudice in 2019. Kara Richardson, a spokesperson for the attorney general, said her office was aware of the case but declined to comment on specific allegations against those two companies.

Coyle, the head of Georgia Watch, said she’s disappointed that weak consumer laws tie prosecutors’ hands. “Municipalities can only do so much,” she said, referring to what she calls abusive behavior by the title-lending industry.


Sitting at his tidy ranch house in a leafy neighborhood in south Savannah, Robert Ball has a difficult time describing just how shocking it was when he realized in the summer of 2019 the extent of his debt with TitleMax.

Ball had become his wife’s full-time caregiver. Gloria was frail and barely had energy to get out of bed. Doctors had told him she had little time left. His sorrow was compounded by a second fear. Amid their increased medical bills, Robert had fallen behind on their mortgage payments. “When I was coming up, there were not a lot of Black folks who owned their home. If you have that roof, that is a sacred thing,” he said. “I was facing the loss of my wife. No way I could handle losing our home as well.”

On July 1, 2019, before the Fourth of July holiday weekend, Ball went to the TitleMax store on Abercorn Street to make his usual monthly payment. He asked the manager he had dealt with for two years just how much more was left on his debt. The manager looked up his account on her computer screen and delivered the crushing news.

Ball’s principal remained at $9,516 — just $2 less than the original amount of his pawn, according to court documents.

It had never occurred to Ball that his dedicated monthly payments weren’t paying down his principal. He assumed that, like a bank loan, if he paid what TitleMax told him to, he would eventually pay off the debt.

“It was a terrible feeling. I mean, I worked my whole life, for 38 years. I thought we were going to enjoy our retirement together. Instead, we were facing this kind of catastrophe. It’s a shameful situation for people like us — to be in debt,” Ball recalled.

He argued with the manager, but that didn’t change the ledger on her computer screen.

Ball didn’t know how to get his financial affairs in order, all while tending to his dying wife. He then got some unsolicited advice from a friend: Declare bankruptcy and try to get into a debt repayment plan. In Georgia, individuals who file for Chapter 13 bankruptcy work through a federal trustee to create a court-approved plan to repay creditors, often at steeply reduced rates. This was a solution, his friend advised, to keep the family house safe.

Ball, who spent his life as a medical tech delivering blood for the Red Cross, swallowed his pride and did it.

But the U.S. trustee appointed to Ball’s case had some more unwelcome news. His TitleMax pawn couldn’t be wrapped into a settlement with creditors. The company had status as a secured creditor due to Georgia’s pawn statutes, and would have to be paid back first and at the original terms of the title pawn.

Lorena Saedi, a bankruptcy lawyer and managing partner of Saedi Law Group in Atlanta, said stories like Ball’s are not unusual. At least once a week, she sees clients who are struggling with debt traps set by title lenders, and around a third of her bankruptcy cases include title lenders.

“There is no recourse. Title lenders operate a business that, while obviously immoral, is entirely legal in Georgia. It’s a terrible place to be powerless, poor or just down on your luck,” Saedi said.

Six months after Robert Ball filed for bankruptcy, Gloria died. Ball eventually paid off TitleMax.

Now, the 75-year-old spends his time trying not to drown in bitterness. Spending time with his daughter and grandchildren helps. Yet as he crawls out of the seven-year credit shadow caused by his bankruptcy, Ball prays that his old car doesn’t break down, and that he doesn’t need any expensive medical help himself.

“I have no safety net. I only have Jesus,” Ball said.

Students in the Covering Poverty Project at the University of Georgia’s Cox Institute for Journalism Innovation, Management and Leadership contributed research. Reporting for this project was supported by a grant from the Fund for Investigative Journalism.

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