Title pawn industry warns legislation could hurt the poor

GDO Report

Proposals to regulate the industry were introduced last year after reports in local media focused attention on title pawns, which work something like 30-day renewable loans against automobile titles. Typically they are in the $300-$500 range.

Critics claim those who use the service face interest rates of as much as 300 percent and are sometimes locked into a cycle of debt by using the service.

The pawnbroker can sell the car if he is not repaid, and if the car fetches more than the amount of the loan he can pocket the difference since no law requires him to refund any excess to the original owner, critics say.

The House and Senate banking committees have held hearings over the summer on legislation to restrict interest rates and to require a rebate to the consumer if there is excess money after the car has been sold and the debt repaid.

Tuesday's hearing, before a subcommittee of the House banking panel, was another in that series.

One owner of a title pawn business, Mark Moore of Roswell, urged lawmakers to defeat the bills "and prove the state of Georgia is pro-business and we're not just a bunch of Socialists here trying to run everybody's business."

The legislation would make it virtually impossible to operate a title pawn business at a profit, and thus would "eliminate access to finds by those who need it the most," he said.

He and other speakers said it is only as a last resort that repossession occurs in the industry and there are few cases in which a car - typically old and with high mileage - is sold for more than the value of the pawn.

When that occurs, his company already gives the excess back to the consumer, said John Robinson, chief operating officer of Title Max, which has 90,000 customers in four states, half of them in Georgia, and a Georgia payroll of $10 million.

Industry spokesmen also challenged as misleading claims that title pawns carry interest rates of 300 percent or more. That figure is computed as if the loan was in existence for a year. Most last no more than three months, they argued.

Current state law allows pawnbrokers to charge up to 25 percent interest for each of the first three months, then 12.5 percent per month thereafter.

Rep. James Mills, R-Gainesville, the House banking chairman, said it's too early to say what the Legislature will do, but added he is having second thoughts about the bill he introduced requiring brokers to rebate any excess to consumers whose cars have been repossessed and sold.

He said he's learned that many of the repossessed cars are junk which do not even cover the cost of the pawn. "If you're going to make them give back the excess, what about the times the vehicle is not worth the loan?"

On the Senate side, Chairman Bill Hamrick, R-Carrollton, has circulated for discussion a draft bill that would place pawnbrokers under the authority of a state agency with power to regulate the industry and look into claims of abuse.