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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Mar 22, 2022

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Thanks to a law change in 2011, Virginia is the current national magnet for car title loans according to the Richmond Times-Dispatch. Nearby residents of Washington D.C. and Maryland flock to Virginia in order to escape their own locations that have capped interest rates making car title lending all but extinct.

In 2010, Sen. Richard Saslaw, along with other Virginia lawmakers, created regulations for car title lenders. That regulation was restrictive, yet still allowed the industry to conduct business within the state.

Then in 2011, Sen. Saslaw created new legislation that permitted auto title loans to be offered to nonresidents of Virginia. As a result, the number of licensed car title loan financiers has nearly doubled within the state.

In 2010, there were 15 licensed auto title loan businesses that operated out of 184 locations. In 2011 there were 26 licensed lenders that maintained 378 lending locations.

Unfortunately, the number of complaints regarding the high costs of auto title loans and the aggressive collection tactics of lenders has also spiked.

West Virginia Attorney General Darrell V. McGraw Jr. recently investigated claims of car title lenders bothering defaulting borrowers who were in hospitals. In another incident, a woman had her vehicle illegally seized without the required prior notice.

Despite these obvious problems, car title loan revenue for 2011 reached $125 million within Virginia, according to the Virginia State Corporation Commission.

In comparison to the boom of car title lenders within the state, payday lenders have seen a two-thirds drop due to reforms made by the State General Assembly since 2008.

Similar to payday loans, auto title loans can sometimes carry high interest rates which may at times cause borrowers to fall into cycles of debt. For example, a one year car title loan for $1,000 may come with an annual interest rate of 250 percent, far larger than even the most expensive credit cards.

According to the opinions of consumer advocates, auto title loans can be worse than payday loans since they place borrowers at risk of losing their vehicles through repossession. While consumer advocates claim Sen. Saslaw is too close to the industry, the Senator defended his legislative history by stating that he believed that they should be regulated rather than banned.

Delegate Mark D. Sickles, a supporter of Saslaw’s 2011 legislation, stated that car title loans offer a valuable service to borrowers who need funds yet are likely to lack sufficient credit for obtaining small loans from traditional lenders.

“I think there are people who actually like this. They’re not feeling enslaved at all. At some point, we have to say, ‘People, you’re grown-ups,’” Sickles told the Richmond Times-Dispatch.