Consumer groups call car title loans predatory

"A lot of the consumer protection issues that are debated in regard to payday lending don't exist in title lending," Smith said.

Here's how the loans usually work: A borrower gives the title to his vehicle and a copy of its keys to a lender in exchange for a loan up to about half of the car's wholesale value. The borrower agrees to repay the loan plus triple-digit annual interest and other fees and often must pay back the loan in a month or two. If the borrower falls behind, he could lose his car.

There is no nationwide data on the industry. Because the lenders are unregulated in several states, officials have no way of keeping track of the loans.

"We know they are operating in Virginia, I just couldn't tell you how many or who they are," said E. Joseph Face Jr., commissioner of the state's Bureau of Financial Institutions.

There also is no way to know how many borrowers are losing their cars.

Many of those repossessed in Virginia wind up at Bryan Buchanan Auto Auction near Roanoke. The auction runs through about 100 car title loan repos each month.

On a chilly February night, about 20 repossessed by LoanMax were auctioned, most bringing between $750 and $2,500.

That's good news for Lorenzo Gill, 28, and Kisha Hunter, 20, both of Roanoke. They were there to find a reasonably priced car, placing the winning $2,200 bid on a 2000 Chrysler LHS.

"It's sad," Gill said as he looked out over the line of cars in the gravel lot. "But one man's loss is another man's gain."

Bruce Johnson is trying hard not to lose his 2000 Dodge Neon. He and his wife, Helen, took out an $800 loan from Fast Auto Loans Inc. near Richmond. They've paid three payments — $533 — and still owe more than $900.

Johnson is paying about $40 per month on the principal and about $200 in interest. If he stops, he'll lose the car. If he continues, he'll sink more money into the car than it's worth.

"I'm paying $5,000 for a car that cost me $1,300, and if I get sick and miss a payment or can't make a payment they're going to come take my car away," Johnson, a 67-year-old retired carpenter, said in a telephone interview.

Johnson now wishes he'd just gotten a payday loan. At least then, he says, he would have known what he owed. Either way, he said, legislators need to protect families like his from predatory lenders.

While industry opponents want caps on the amount car title lenders can charge, they fear regulating the industry will legitimize it the way it has payday lenders.

States that have regulated payday lenders have seen a proliferation of the storefront cash advance shops. Last year, 24,000 payday lenders made about $40 billion in loans nationwide, according to The Center for Responsible Lending.

Republican Delegate Harvey Morgan championed the 2002 law that opened Virginia's doors to payday lenders and now regrets it. He hopes car title lenders will simply go away as legislators pass stricter regulations on payday lenders, but he's not optimistic.

"There's always going to be one more standing in line to come in and separate people from their money," he said.

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