For Immediate Release                                                              For More Information:

Monday, January 30, 2006                                                       Jennifer Mullin 515-281-0173 

 

Governor Vilsack calls on legislature to limit lending practices that prey on working families

 

Announces his support for bi-partisan legislation that would cap interest rates on car title loans

 

DES MOINES – Governor Tom Vilsack today joined Democratic and Republican legislators, and Attorney General Tom Miller in calling for an end to car title lending practices that create cycles of never-ending debt and limit opportunities for working Iowans.

 

"Too many Iowans have lost their hope of economic security because of this type of lending,” said Governor Vilsack. “These loans plunge families deeper into debt while taking away their mode of transportation that is often essential to keeping a job. Strong communities protect citizens from these types of predatory practices.”

 

Car title loans require an applicant to give a set of keys and a car title in order to take out a loan, thereby securing the loan with the vehicle. The loans are typically less than $1,000 and are given without a credit check. The borrower makes the first payment after 15 days and then every 30 days thereafter. The borrower pays one percent interest per day and must pay a minimum of ten percent of the loan principal with each payment, excluding the first payment. The car can be repossessed if the borrower fails to cure the loan within 30 days.

 

Some car title lenders in Iowa charge 264 percent interest and have charged up to 360 percent - 29 times the rate charged on unsecured credit cards. Draft legislation would protect consumers by lowering car title loan interest rates to 21 percent.

 

More than 33,000 loans have been issued and nearly 1500 cars have been repossessed in Iowa as a result of car title lending.