A proposed bill that would cap the interest on those controversial car title loans in Arizona would, if passed, help the poor-credit users of those loans and actually add some legitimacy to the industry.
So the title loan industry wants nothing to do with that 36 percent annual interest limit and prefers a proposition that would remove any limits on interest and fees.
Arizona voters got rid of payday loans in 2008 but auto title loans quickly replaced them as a source of fast cash for those considered high risk. Judging from the proliferation of those establishments, there is a demand for these high-interest loans.
Ideally, those with poor credit would work to limit spending and rebuild credit. Those who don’t face predatory lenders, including auto title loan companies. Depending on how one figures fees and compounding, the interest rates on these loans may be up to 17 percent per month.
The bill’s sponsor, Republican David Farnsworth, told Capitol News Service the interest rates can go as high as 300% per year.
Farnsworth notes his Republican colleagues feel the interest regulations run counter to free-market principles.
This is true. Arizona has very loose usury laws, mostly defining the legal limit as whatever parties agree on. But pawn shops have legal limits (eight percent for the first two months; four percent thereafter.) So there are some standards in state law.
Car title loans are at least a notch above the shadowy world of traditional loan sharking, where hugely excessive interest rates are demanded and late payments are enforced with violence.
Farnsworth’s bill also requires that borrowers produce clean titles to their vehicles. Currently, borrowers can take out loans on vehicles they are still paying off. This provision is an important change.
We feel for those so unfortunate as to need one of these loans, especially if the proceeds are for the basics of life such as rent or groceries. Farnsworth’s bill would make it possible for more people to actually pay off these loans, which should be a better deal for both lender and borrower.
(0) comments
Welcome to the discussion.
Log In
Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.