58°F
weather icon Mostly Cloudy

Most who take out auto title loans resort to reborrowing, official says

One in five people who take out single-payment car title loans end up seeing their vehicle seized by the lender for failing to repay their debt.

Most people who take out these controversial loans resort to reborrowing, because they’re unable to repay them at once, Consumer Financial Protection Bureau Director Richard Cordray said in a press call Tuesday, discussing the bureau’s new report and findings.

Auto title lenders generate about two-thirds of their debt from borrowers “who end up being mired in debt for most of the year,” Cordray said.

“It is evidence of the long-term pitfalls of this form of borrowing and another sign that so-called single-payment loans are often anything but that in reality,” Cordray said.

Title loans aren’t tied to a borrower’s income or their ability to repay the loan, and the bureau is considering proposals that would require lenders to determine whether borrowers are able to repay the loan and still meet their other financial obligations, a step towards ending these “payday debt traps.”

Nevada is among the states that allow title loans. Dan Wulz, deputy executive director of the Legal Aid Center of Southern Nevada, said while Nevada state statute includes an ability to repay provision, there’s plenty of ways to maneuver around it.

The Legal Aid Center sees auto title loan cases on average at least once a month, often after the borrower’s vehicle has already been seized. Wulz has seen scenarios where the borrower, often someone in an emergency situation, has signed a statement with income, financial obligations and employment information that’s outdated by a number of months, or that states their housing costs are zero.

If the bureau puts in place more specific factors that can be used in determining a borrower’s ability to repay a loan, following a similar move with mortgage loans in 2014, that would be a step in the right direction, Wulz said.

“There’s lots of wiggle room and things happen,” Wulz said.

Vehicle title loans typically have 30-day terms, and are often used by borrowers for emergency spending needs. The borrower’s vehicle is used as collateral, with the lender holding the title until the loan is repaid.

The report released Tuesday analyzed 3.5 million single-payment car title loan records from nonbank lenders over a three-year period. The bureau found that the average loan was $959, with an average annual percentage rate of 300 percent, which is substantially higher than most forms of credit.

Borrowers who can’t pay off the loan in a single payment must either borrow again or face losing their vehicle. With additional fees and interest added each time more money is borrowed, the debt continues to grow.

More than 50 percent of the time, borrowers took out four or more consecutive loans, according to the bureau’s analysis. More than 80 percent of the loans were re-borrowed the same day a previous loan was repaid, and close to 90 percent were reborrowed within 60 days.

The bureau’s auto title loan report follows another study it conducted focused on payday loans, which found that borrowers see high bank penalties and could be at risk for losing their checking account, much like borrowers who take out the title loans could see their vehicles seized when they don’t repay the loan.

Contact Jamie Munks at jmunks@reviewjournal.com. Find @JamieMunksRJ on Twitter.

Don't miss the big stories. Like us on Facebook.
THE LATEST
Beatty Clinic gets tons of help with new a/c

BEATTY — The Beatty Foundation, an affiliate of AngloGold-Ashanti (AGA), did tons of good at the Beatty Clinic on March 22. Nine tons, exactly.

11th Annual Chili Cook-Off brings tempting tastings and festival fun

The 11th Annual International Chili Society and Silver State Chili Cook-Off took over Petrack Park this past weekend for three days filled with savory tastings, fun and activities and of course, some intense culinary competition.

Pahrump homeschoolers dance the night away

Pahrump Valley’s homeschool youth were whisked away into the Enchanted Forest this month, with local Moose Lodge #808 hosting a night of dancing and revelry in honor of an age-old adolescent right-of-passage, prom.

Looking for some family fun for Easter? Hop over to Simkins Park

Anyone looking for a fun, family-friendly festivity to enjoy this holiday can hop on over to Simkins Park to join the Mills family as they celebrate Easter Sunday with worship music, free food and an enormous 14,000-egg hunt that is sure to bring a smile to hundreds of faces.

Campground fees to increase at Death Valley National Park

DEATH VALLEY, Calif. — Visitors to Death Valley National Park can expect a slight increase in entrance fees for various campgrounds beginning on May 1.

Clerk staffer Cori Freidhof appointed interim leader

Nye County Clerk Mark Kampf’s time in office officially comes to a close on March 31 and deputy clerk Cori Freidhof has now been selected to assume that vacated seat. Freidhof will take over the office as of Monday, April 1 and fulfill the unexpired term ending Jan. 1, 2027.

Gaming can have impact on us

When does gaming cross the line from recreational relaxation to problematic behavior? How do video games and gambling relate? What resources are available for those who find themselves struggling to control their relationship with video games and gambling?

County eyeing impact fee increases

The cost to develop in Pahrump could go up, with a public hearing on a proposal to raise local impact fees set for next month.

Here’s who filed as political candidates in Nye County

Locals have filed their political candidacy as of March 15 and this year two major offices in Nye County will be up for grabs in the general election. Nye County residents have to first narrow down their preferred party candidate on June 11 in the primary and then vote in November to support their preferred candidates.