Michigan weighs 200% interest on car-backed loans

Michigan's pawnbrokers are unlikely allies with advocates for low-income families to block proposed legislation that would allow some high-cost car title loans in Michigan.

A state Senate bill, sponsored by outgoing Senate Majority Leader Randy Richardville, a Republican from Monroe, Mich., would allow consumers to borrow money against their car titles, while keeping the car, and be charged fees of 20% a month — or effectively an annual percentage rate of more than 200%.

Not surprisingly, many consumer groups charge that the car title loans are predatory and exploit people who already are having trouble paying their bills. Borrowers may have bad credit and find the ads for "no credit check" appealing.

"People are going to go to these (loans) because they're not getting credit elsewhere," said Ross Yednock, program director for the Michigan Economic Impact Coalition, which works with individuals and groups committed to improving access to free income tax preparation assistance.

Michigan pawnbrokers say they're against the bill, which would amend the existing pawnbrokers law.

Mark Aubrey, owner of Motor City Pawn Brokers and president of the Michigan Pawnbrokers Association, said, "We're actively fighting this in Lansing currently."

He pointed out that pawnbrokers can charge up to 3% a month now, plus $1 a month or part of a month for storage, and do not want to move into car title lending.

"We don't want to be in the same category as the title lenders," Aubrey said. "They're trying to plug in title lending into the pawnbrokers act."

Amber McCann, a spokeswoman for Richardville, said the bill would enable individuals to decide if they want to use their vehicle as an asset for a loan.

Consumers who own their cars outright and have a clean title would be able to obtain a loan through a pawnbroker under the bill.

She said Richardville has talked to a number of stakeholders, including financial institutions and those in the auto industry, and he is not aware of opposition to the bill.

But consumer groups are reaching out to the news media to put a stop to any potential action in Lansing.

In Michigan, a company may make loans by placing a lien on the title of the automobile, but they are not allowed to take the title in exchange for the loan, said Andrea Miller, public information officer for the Michigan Department of Insurance and Financial Services.