Title loan companies can keep charging whatever interest rates the market will bear. A bill that would have capped interest rates on car title loans at 36 percent failed overwhelmingly in an Illinois House committee. State Rep. Ed Sullivan (R-Mundelein) says he voted against the bill because of a provision that would ban lenders from seizing titles after the principal on a loan was paid. That would discourage people from paying interest, he says.
Click here for summary
“You might as well not even have an interest rate at that point. Just say ‘we’re going to give you $5,000 for whatever and whenever you pay that $5,000 we’re done with it.’ Because that second part in essence takes away any potential to make back your risk.” Archie Lawrence, president of the Springfield branch of the NAACP, says title loan lenders prey on the poor. “If they don’t pay their loan off, then they lose their car. If they lose their car then they’ll lose their job. Then even more debt will pile up,” he testified. Title loan companies charge annual interest rates of 200 to 300 percent.Lawrence says title loans are many times the only option for low-income people who don’t have the credit to get a loan at a bank or credit union. “The people they make those loans to obviously will not be able to pay those loans back. Not only will they lose their car, not only will they lose their money but they lose any chance to get out of that downward spiral of debt.”