In January 2012, a new bill was passed in New Hampshire. This bill empowered the auto title loans providers to charge 25% interest per month. The New Hampshire governor Lynch opposed the bill tooth and nail. He openly expressed his concern that this bill would do a greater harm to household earning, communities as well as overall economy. The opponents of the bill have echoed the governor’s worries that the added interest will only trap the borrower into a deep trench of debts.
Now let us shift our attention to the state of California. In January, the state made an attempt to regulate the market of auto or car title loans. A new bill was tabled and passed with a view to placing a higher cap on the interest rate. The bill mainly targeted those companies which used to charge an insanely high interest rate ranging anything between 72% and 180% from the borrowers with poor credit score, low income level and who need some faster cash. However, in case of borrowing more than $2500, this upper cap limit does not apply.
Those who heavily hoped that the government would ban the auto title loans are deeply frustrated. At least, they expected that the laws would contain some clauses to instruct the lenders for additional disclosure. Would there have been more provision for such clause; the laymen might have got a chance to educate themselves. Those who favored this loan said that eliminating this funding option would simply mean taking away a quick cash choice from the borrowers. Moreover, the supporters argued in favor of higher interest rate due to the high risk nature of car loans.
The similar restriction was imposed in the state of Illinois. The law-makers were looking for a strong clause that would disallow the lenders to charge more than 36%. The studies revealed that the Illinois borrowers repaid a cosmic amount of $1000 in interest in the last year. The bill, however, faced strict oppositions and failed to turn into a law on the ground that in the previous year, 2010, predatory lending laws were passed to curtain the rights of the lenders. The auto title loan critics say that the lending practice is abusive, insane and often leads to bankruptcy.
The title loans are often supported on the ground that these are quickly available and so can meet immediate obligations of the borrowers. However, regulation to some extent is a necessity to protect the borrowers from getting into some evil trap.