EASY MONEY; HARD INTEREST: A photo from a car title loan ad.

The New York Times reports on a new incarnation of the sub-prime mortgage lending racket. It’s the car title loan — fast credit for clunkers and exorbitant interest rates that too often leave poor people in the hole and without the cars whose titles they gave up for small loans.

Title loans are an increasingly prevalent form of high-cost, short-term credit in subprime finance, as regulators in a number of states crack down on payday loans.

For many borrowers, title loans, also sometimes known as motor-vehicle equity lines of credit or title pawns, are having ruinous financial consequences, causing owners to lose their vehicles and plunging them further into debt.

A review by The New York Times of more than three dozen loan agreements found that after factoring in various fees, the effective interest rates ranged from nearly 80 percent to over 500 percent. While some loans come with terms of 30 days, many borrowers, unable to pay the full loan and interest payments, say that they are forced to renew the loans at the end of each month, incurring a new round of fees.

Car title lending has provided a new outlet for shylocking in states that have cracked down on payday lending, such as Arkansas. Lots of online sites claim to offer car title lending in Arkansas, but on-the-ground outlets seem to be in surrounding states — Texarkana, Texas, for example. The attorney general’s office in Arkansas has sued an Arkansas pawnbroker over car title loans with effective interest in the range of 300 percent arguing that they were illegal.


The “industry” enjoys Wall Street backing. It seems likely to grow, not wane, as happened with payday lending.