Title loans are nasty little beasts that can easily send you into a spiral of debt that is very difficult to get out of. Here’s how a title loan works, in a nutshell: You hand over your car’s title to the lender and get, say, a $1,000 loan. An interest rate in the neighborhood of 300 percent a year is standard, although it may be considerably higher. The loan – plus interest – is typically due in 30 days, for a total (in our case) of $1,250. But the majority of borrowers are unable to pay back the loan plus interest in 30 days. No problem! Title lenders are happy to allow you to pay just the $250 interest and roll over the principal to the next month, but you’ll pay another $250 in interest for the privilege. That’s how title lenders make a killing. The average title loan borrower rolls over the loan eight times, and when it’s finally paid it off after eight months, that $1,000 loan will have cost a total of $3,000. If you default on the loan, you’ll lose your car.
Now, 30 states have categorically banned title loans due to their predatory nature, their ridiculously outrageous interest rates, and the fact that one out of six borrowers ends up losing the family car after defaulting on the loan. A smattering of other states have capped title loan interest rates at a reasonable 36 percent or lower, but title lenders tend to stay away from those states since they can only make a merely respectable profit instead of raking it in hand over fist. Some states, like Ohio, don’t allow title loans, but they turn the other way when sneaky lenders figure out how to buck the system and flip the bird at the Man. And the spineless and immoral legislators? They look the other way, because Freedom. And Profit.
Ohio: “Come On, Who Really Cares About the Poor?”
Certainly not Ohio. Although title loans are illegal in Ohio, title lenders do booming business in the state.
Ohio’s Short Term Loan Act specifically prohibits lenders from accepting a car title as collateral for a short-term loan and caps the interest rates on short-term loans at 28 percent. But title lenders do accept car titles for short-term loans, and the interest rates are usually 300 percent or higher.
How is this possible? Well, it’s largely due to the general attitude of Republican legislators, who are notorious for their utter disdain for people who live in poverty, but who are like a pack of salivating wolves (except not as smart) when it comes to businesses making profits. So what happened was, title lenders began operating under Ohio’s Credit Service Organization Act, which requires “registration and bonding for organizations that offer credit repair, debt counseling and related services.” In Ohio, CSOs are defined as organizations that charge a fee to help people improve their credit rating, get credit, and remove adverse information from their credit reports.
So to get around the fact that title loans are illegal in Ohio, title lenders simply put on a wig and some cheap lipstick and get a CSO license from the state, which apparently has the education of a preschooler and is therefore unable to see that a title lender in a wig and lipstick is still a freaking title lender. The title lender, now officially a CSO, then acts as a broker to help borrowers secure a title loan from a “third party.” For their services, these “CSOs” charge $25 per $100 and usually require a minimum loan amount of $1,500.
The CSO model is used by title lenders for the sole purpose of getting around laws that are supposed to protect consumers from unfair lending practices. There is no evidence that any credit repair services are being offered by these title lender/CSOs, and in fact, they’re doing far more damage to the finances of low-income families across the state by charging their “credit services” fee on top of the astronomical interest rates that characterize title loans.
So you go to a title-lender-slash-CSO, pay them a staggering $375 to find you a $1,500 title loan from a “third party provider,” and on top of that, you get charged in the neighborhood of 300 percent annual interest on the principal amount. Under this model, your $1,500 title loan is gonna cost you $4,875 if you hold onto it for the typical eight months.
You’re sitting there going, how in the holy hell is this even possible? It’s simple: the rights and freedoms of businesses to make gigantic profits are more valuable than the overall wellbeing of America’s financially vulnerable populations, period. And here’s the part that makes me want to vomit leeches all over the holy benches from which these low-life legislators preside: The lawmakers who categorically refuse to do a damn bloody thing about this obvious breech of the law are the exact same lawmakers who spew nonstop, party-line rhetoric about family values.
How on earth does allowing a business to charge $4,875 for a $1,000 loan make for good family values? How does that help create food-secure families? How does it improve the quality of life for families who barely make enough money to pay for the absolute necessities, like food, gasoline, rent, and utilities? How does it help ensure long-term financial security for families living in poverty? It doesn’t. And Republican lawmakers do not give one filthy hoot about it. Let’s be clear about the fact that when these morally corrupt individuals talk about family values, they’re envisioning white, middle-class families who send their kids to Christian school and are entirely too respectable to be seen in the kind of dirty, poor neighborhood where you’ll find a title lender. The rest of the population can suck it, because they don’t count.
So although title loans are in no way legal in Ohio, you can get one anyway, no problem, because legislators have more important things to do than to make sure businesses are complying with laws designed to protect consumers against sleazy practices.
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