New Hampshire Governor John Lynch. Image: marcn/Flickr/CC BY

New Hampshire Gov. John Lynch vetoed a bill Wednesday that would raise the ceiling title loan lenders can charge. The bill would have allowed up to 25 percent interest charged monthly. The state joins 31 others in disallowing these kinds of loans.

Short term loans secured by vehicle titles

Title loans are short term loans secured by vehicle titles. The current rate allowable, adopted by the state in 2008, is 36 percent annually. That is the same cap allowed nationally on loans made to members of the military and their families. That federal bill was passed by Congress in 2006 and signed into law by President George W. Bush.

State Bill 57

New Hampshire State Bill 57 would have allowed lenders to charge up to 300 percent annually. It also would have increased the percentage of the principal a borrower would have paid to renew the loan from 5 percent to 10.

Bill had many detractors

Lynch supported the veto by saying the bill was opposed by many legislators in both parties, as well as the Local Welfare Administrator’s Association, AARP, the Banking Department, the Department of Justice, the New Hampshire Community Loan Fund and New Hampshire Legal Assistance.

Governor says it would hurt families

The bill, Lynch said in a press release, would be detrimental to families, the community and to the economy. The current 36 percent cap, he said, is “reasonable and well thought out. There is no evidence that reversing that law would benefit New Hampshire. On the contrary, there is significant evidence that it would harm our state and families.”

A cycle of debt for vulnerable families

“Failure to repay a loan could lead to seizure of the family car,” Lynch explained, “Which is often essential for family members to maintain employment. “Furthermore,” he said, “for vulnerable families, these excessive interest charges could force them further into a cycle of debt and potentially onto public assistance.”

Sources

Governor NH
Boston.com

The Virginia Senate has changed wording of a bill to open up title lending. Image: Flickr / waldoj / CC-BY-SA

In Virginia, short-term title lending is about to receive a boon. A new bill signed into law Monday will allow lenders in the state to offer their products to non-residents. The bill is specifically targeted toward increasing business for Virginia lenders.

Virginia title lending

Senate Bill 1367 in Virginia passed the Virginia Senate easily and with a very close vote in the House. The bill officially opens vehicle-collateral same day loans to residents of all states. Previously, loan companies had to check that their customers were residents of Virginia before signing off on their loans. The state has not released exact estimates for the amount of business income this will bring to the state, though car title lenders donated about $240,000 a year for the last five years to Virginia legislators.

Limits on title loans

Virginia has recently tightened regulation on title lending. In 2010, limits were passed that keep title loans to 50 percent or less of the value of the vehicle. Payments are also limited to no more than 12 months. Despite these new limitations, Virginia has some of the most permissive regulations when it comes to title loans. Many of the states surrounding Virginia have recently limited short-term loans much more tightly, effectively pushing the lenders out of the business entirely. This has created a credit crunch for small loans in the region.

Differentiating short-term credit products

The Virginia Partnership to Encourage Responsible Lending and AARP Virginia both released statements blasting Virginia’s Senate Bill 1367.

“People are very vulnerable in this economy and desperately seeking help,” said David DeBiasi with AARP Virginia. “The last thing they need is ‘help’ that turns out to be exploitation.”

Short-term credit products vary widely, and title lending is one of several short-term credit products. Title loans require the borrower to sign over the title of a vehicle as collateral to a short-term loan. The interest rates on these loans vary but are usually higher than traditional vehicle loans.

Sources

Hampton Roads
Legislative Information Service of Virginia
Washington Examiner

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