Dems take aim at title loans

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By Todd Dorman | Tuesday, December 12, 2006 12:41 AM CST | () comments

DES MOINES — Democratic Statehouse leaders vowed Monday to crack down on high-interest car title loans when they take over the Legislature next month.

Lawmakers said the Senate and House likely will cap interest rates on title loans taken out by low-income borrowers who put up vehicles as collateral. Interest rates on the loans can exceed 300 percent, Democrats contend.

Legislation backed by Democrats would cap interest at 21 percent, the same limit that applies to consumer loans offered by banks. In recent years, Republicans who controlled the Iowa House blocked debate on the bill.

“This practice is despicable,” said Rep. Kevin McCarthy, D-Des Moines, who will become House majority leader. “I can assure you this year it will come up for debate.”

Title loan critics insist high interest rates make it difficult, if not impossible, for some borrowers to keep up with payments. Losing a car often means losing transportation to work, compounding their inability to pay.

“A car itself is a lifeline,” said Iowa Attorney General Tom Miller, who favors an interest cap. He said few states allow unregulated rates. “Iowa is a backwater on this issue.”

Sen. Joe Bolkcom, D-Iowa City, said title loan legislation could be part of a broader package of reforms. He also wants to place limits on high-interest payday advance loans and loans tied to tax refunds.

“We are all optimistic about the prospects for passage of real reform,” Bolkcom said.

Outgoing House Speaker Christopher Rants, R-Sioux City, resisted capping loan rates in the past. He contends the change will put loan firms out of business, cutting off the only avenue for borrowing available to some Iowans with bad credit.

“We’ll have a whole lot of legislation this year saving people from making bad decisions,” said Rants, who will become House minority leader in January. “Government will do our thinking for us.”

Todd Dorman can be contacted at (515) 243-0138 or todd.dorman@lee.net.