With hundreds licensed in Arizona, title loans are big business. They are the only loans available in the state that can legally charge triple-digit annual percentage rates.
According to the Consumer Financial Protection Bureau (CFPB), nearly one-third of of title loans end in default. Another eleven percent result in repossession .
New proposed rules from the CFPB are looking to decrease defaults and increase protections from abusive practices.
The biggest changes would include a full payment test . Lenders would have to check a borrower's finances to see the likelihood that they could afford to make payments without financial hardship.
Diane Brown, of consumer advocates Public Interest Research Group (PIRG), said the rules are a good start but not enough, citing that the rules don't indicate a standard way that payment testing would occur.
"We really encourage them looking forward to tightening up the language so that it isn't vague," Brown said.
Loan industry group, Arizona Financial Choice Association opposes the rules.
"The decision will force consumers into higher cost alternatives like bank overdrafts and late fees, perhaps even to unlicensed and unregulated lenders," the group said.
But the rules aren't a done deal, yet.
"We have a chance right now to put an end to a lot of the worst practices," Brown said.
So what do you think? The CFPB is taking public comment on the issue through Sept. 14.
Contact the CFPB:
Reference Docket No. CFPB-2016-0025 or RIN 3170-AA40:
• Email: FederalRegisterComments@cfpb.gov. Include Docket No. CFPB-2016-0025 or
RIN 3170-AA40 in the subject line of the email.
Follow the instructions for submitting
• Mail: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection
Bureau, 1700 G Street, NW., Washington, DC 20552.
• Hand Delivery/Courier: Monica Jackson, Office of the Executive Secretary, Consumer
Financial Protection Bureau, 1275 First Street, NE., Washington, DC 20002.
Instructions: All submissions should include the agency name and docket number or
Regulatory Information Number (RIN) for this rulemaking.