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How Title Lenders Trap Poor Americans in Debt With Triple-Digit Interest Rates

For some Georgia residents, title pawn contracts offer a quick way to obtain desperately needed cash. But poor regulation of a confusing sys

ProPublica

When Robert Ball turned 63, he was looking forward to retirement in his wife’s hometown of Savannah, Georgia. The couple had a comfortable house with a lush garden, the certainty of his pension and the hope of spending more time with their grandchildren.

That dream shattered when Ball’s wife, Gloria Ball, developed severe health problems. They faced huge medical bills, yet their bank refused to refinance their mortgage. Left with few options for raising cash, Robert Ball drove to TitleMax, a business that prospers in Georgia’s banking deserts and lends money at terms that would be illegal for other financial institutions. “I was desperate” for quick cash, Ball said. “They welcome folk like me.”

In July 2017, Ball signed a contract to receive $9,518 from TitleMax in exchange for a lien on the title to his 2006 Honda Ridgeline truck, money that the couple used to pay for Gloria’s medical needs. The terms of Ball’s contract were typical for TitleMax, specifying that he would have to repay the money plus interest in 30 days. But the store manager explained that, as long as he paid $1,046 each month, he could extend the contract indefinitely and keep his car — on which he had no other debt — from being repossessed by the company. What the manager did not mention, Ball said, was that his payments would only cover interest.

For two years, Ball made his payments diligently, court records show. Then the company told him something that nearly made him fall down: Even though he had paid more than $25,000 by then, his principal hadn’t budged.

TMX Finance, TitleMax’s parent company, calls itself a community resource to its 293,000 customers, people written off as credit risks by traditional lending institutions but who need financing to pay for life’s basic needs. As the nation’s largest title lender, TitleMax thrives on an innovative business model that lends money to risky clients in exchange for collateral: the title to the vehicle in which the customers drove to the store. In 2019, TMX Finance reported $910 million in revenue, primarily from its TitleMax brand.

Rather than seeing the company as a force for good, a growing consortium of lawmakers, religious leaders and consumer advocates believe TitleMax, and its industry writ large, to be predatory leeches on the growing ranks of working-class Americans. More than 30 states prohibit title lending or have laws inimical to the industry. In 2016, TMX Finance paid a $9 million fine, approximately 1% of the company’s revenue that year, to the federal Consumer Financial Protection Bureau, which ruled that the company misled customers about the full costs of its loans in Georgia, Alabama and Tennessee. Since then, at least five states have passed laws capping interest rates that title lenders can charge at 36% per year.

Georgia, however, has bucked this trend. Nearly two decades ago, the state made it a felony to offer high-interest payday loans that state lawmakers described as usurious. Yet state law allows title lenders to charge triple-digit annual interest rates. This has helped the industry grow like kudzu throughout the state, which is home to three of the nation’s top title lenders.

The Current and ProPublica spent seven months examining the operations of TitleMax, the dominant industry player in Georgia, based on hundreds of pages of internal company documents, interviews with current and former company officials and an analysis of storefront locations as well as vehicle lien records from the Georgia Department of Revenue’s motor vehicle division. The investigation offers for the first time a window into the scope and scale of the company in the state, as well as the impact on its target customers: the working poor and communities of color.