RICHMOND — Gov. Terry McAuliffe said Friday that he plans to push for limits on what car-title lenders can charge, calling current loans "abusive."
McAuliffe's comments, made during WAMU's Kojo Nnamdi Show, come a month after Virginia Attorney General Mark R. Herring (D) vowed to crack down on unscrupulous operators in an industry that is fast replacing payday lenders as off-brand banking for the poor.
Interest rates can reach 300 percent on the loans, which require borrowers to sign over their car titles as collateral.
While critics call the practice predatory, some Virginia legislators say the lenders fill a niche for borrowers with poor credit. Those who would not qualify for conventional bank loans would wind up going to loan sharks if they did not have car-title lenders as an option, their defenders say.
Virginia has more than 460 car-title loan operations, according to the Virginia State Corporation Commission, many of them opening after the state imposed restrictions on payday lenders in 2009. Car-title lending was sanctioned in the state the next year. The General Assembly spurred expansion by passing a law in 2011 that allows car-title lenders to take customers from out of state.
McAuliffe said his staff was working on a proposal that would rein in the lenders, but he did not get into specifics. He declined to comment on proposals from the Center for Responsible Lending and the Southern Poverty Law Center, which suggest capping interest rates on such loans at 36 percent. He said his plan would be made public before the start of the next General Assembly session in January.
“At the end of the day, we need reasonable lending practices,” he said. “But you cannot see people who are hurting today, who have to go to one of these places, see that they’re in servitude the rest of their lives.”