Borrowers in Missouri are “Trapped in Cycle of High Interest Debt” By Lenders Who Evade Loan Regulations; Lawyers Challenge Lenders’ Loan Classification Loophole in State Supreme Court
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Bibliographic Info:
Author: Matthew Hathaway
Source: Saint Louis Today, “Missouri Lenders Find Ways to Avoid Title-Loan Regulations”
Date: August 1, 2010
Saint Louis Today reports: “Sandra Ahmedin, 65, was broke, and the rent was due. After deciding a car-title loan was her only option, the north St. Louis woman borrowed $800.
She's paid back close to four times that much, but she hasn't reduced the loan's principal. Although she stopped making payments — ‘I've paid enough already,’ she insisted — she fears the lender, Missouri Title Loans, will seize her 2001 Dodge Intrepid. This wasn't supposed to happen in Missouri, say consumer advocates and lawyers representing borrowers such as Ahmedin. Nine years ago, legislators changed the state's title-loan law to limit how many times lenders can roll borrowers' debts into new, expensive loans. The aim was to keep borrowers from being trapped in a cycle of high-interest debt. But Missouri Title Loans and dozens of its competitors have avoided those restrictions by classifying what seem to be title loans as different types of consumer loans that have less burdensome rules. And they do this even when the loans are marketed as title loans and companies bill themselves to consumers exclusively as title lenders. Lawyers seeking to stop this practice say they believe state regulators have allowed lenders to overcharge thousands of Missouri consumers to the tune of hundreds, even thousands, of dollars each. . . . Lawyer John Campbell, who represents three Missouri Title Loans borrowers, said the company shouldn't be able to avoid restrictions on title loans by assigning them a different name. ‘If it looks like a title loan, it smells like a title loan and it works like a title loan; it's a title loan,’ he said. Part of Campbell's suit to end the practice recently was argued before the Missouri Supreme Court, and a decision there could come down as early as this week. At issue is whether a class action — either in front of a judge or an arbiter — can be brought against Missouri Title Loans, despite a clause in the loan agreement requiring individual arbitration. That, Campbell said, would be a first step toward either getting a court to close the regulatory loophole or making it too costly for lenders to avoid the Title Loan Law.”