Since October of last year, auto title lenders in Virginia have had to comply with a set of much stricter regulations than those that had previously existed in the state.
Title lenders are now required to be licensed by the Bureau of Financial Institutions, and must structure their customers' repayments in equal monthly installments of principal and interest, as opposed to just minimum monthly payments of interest, the Virginian-Pilot explains. Additionally, loan terms must extend between four months and a year, and lenders are not permitted to extend credit to active-duty members of the military or their dependents and spouses. A tiered set of maximum interest rates beginning at 22 percent a month for balances up to $700 and a drop to 15 percent on balances that exceed $1,400 were also instated. Last month, the state's Bureau of Financial Institutions released its inaugural report on auto title lending in Virginia. Findings indicated that lenders extended $21.15 million to 22,725 borrowers who made credit decisions
to take out title loans between last October - when the regulations took effect - and December, the news source reports. Since the end of last year, the number of title lenders licensed by the Bureau of Financial Institutions rose from 15 to 24, and lending locations have increased by 40 percent, from 184 to 258. The rise has been particularly noticeable in Hampton Roads, which houses a third of the state's title lending locations. According to the news source, the number of lending facilities in the area have more than doubled from 41 to 88 in less than six months. However, concerns have been raised over the high delinquency rate that emerged in the report. Between October 1 and December 31, 15 percent of the 22,725 consumers who took out title loans failed to make a payment for at least 60 days. Neighboring states have either banned short term lending or capped small loans at rates ranging from 24 percent in Washington, D.C., to 36 percent in North Carolina. According to the news source, consumer groups are calling for Virginia to follow suit. However, proponents of short term lending and title loans argue that imposing an annual interest rate ceiling would effectively put lenders out of business, and the loans provide a valuable service for cash-strapped Virginians who need money immediately. Recent data from the State Corporation Commission indicates that of the 200 vehicles that were repossessed as a result of consumers missing payments, two were sold. This suggests that lenders are willing to work with customers on collecting debts