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A late-night television ad for fast cash caught the attention of Eugenia and Maurice Muhammad about a year ago. Just turn over their car title for a short time, and they would have the money to make ends meet, the ad promised. Soon after, Maurice drove to the storefront lender on Gallatin Pike, and left with about $600 he immediately regretted. But it was too late — the auto title loan nudged the couple into new debt, and a few months later, their car was repossessed in the middle of the night. Situations like the Muhammads' are fueling an effort among consumer advocates to add new regulations to Tennessee's auto title loan industry. The field is part of a wider universe of loan practices that promise easy credit and fast cash, and which critics call "predatory lending." The nation's weakening economy could cause more Tennesseans to turn to such services to make ends meet. But as states have sought to regulate title lending and other fast-cash loan options, the industry has poured campaign donations into coffers of lawmakers across the country, including Tennessee, according to a recent report from the National Institute on Money in State Politics and filings with state Registry of Election Finance. Consumer advocates are hopeful for reform, nonetheless. Webb Brewer, a Memphis public interest lawyer who drafted a bill to cap fees and interest charged by such businesses, said Tennessee is "way out on the fringe in allowing abuse of what I think are desperate borrowers." "If this were put under a spotlight, then I think there would be a lot of support for it," he said. There are sharp differences in views of the title loan industry. Eugenia Muhammad, 31, doesn't think title loans should be allowed. "It's just a big rip-off, it really is, and they prey on those who really can't afford to pay bills and live," Eugenia Muhammad said. In recent years, consumer advocates have been sounding the alarm about high-interest lending. That field includes such businesses as: • "Payday loans" meant to tide borrowers over until their next paychecks. • Tax refund loans, short-term cash advances in anticipation of federal income tax refunds. • Auto title lenders, who take vehicle titles as collateral and repossess the car if the borrower defaults. Billy Mitchell, a vice president with Atlanta-based Community Loans of America, the parent company of the Muhammads' lender, told lawmakers last month that title lenders are good for the community. Despite what critics say, the lenders don't prey on the poor and the elderly, he said. "Title lenders provide positive economic impacts so far as jobs, so far as money that's lent and spent in the communities," said Mitchell, who also serves as a Georgia lawmaker. Mitchell and a company spokesman did not return calls seeking comment specifically about the Muhammads' situation. Nationally, political contributions from high-interest lenders are on the rise, according to a July report from the nonpartisan National Institute on Money in State Politics. In 2000, industry donors gave $1.5 million nationally to state races. In 2006, they gave $6.2 million. In Tennessee, donations from the industry have generally risen over time, totaling almost $600,000 between 2000 and 2006. Among all 50 states, that's the sixth-highest level of contributions, according to the institute report. Rachel Weiss, an institute spokeswoman, said that when an industry is such a focus of legislation, "it's not unusual to see that industry try to gain some leverage." "One of the main ways that they can gain leverage is through campaign contributions," she said. Over the last year, title lenders have been donating generously to Tennessee lawmakers and party caucuses. Tracy Young, the chief executive officer of TitleMax, has given more than $26,000 since June of last year, according to state campaign finance records. Young did not return a call seeking comment. The legislation being studied over the summer would effectively cap the fees and interest at 44 percent a year. Mitchell, of Community Loans of America, told the committee that if the new legislation passed, "make no mistake about it — it would shut down the industry." He accused industry critics of misleading lawmakers, and said most borrowers are responsible and pay the loans off while a small segment of customers is getting in financial trouble or trying to game the system. "I come in here, I'm out of here in 15, 20 minutes, I pay my loan, and it's no one's business what I'm doing. That is an option in America that should be available," he said. After the subcommittee heard most of the testimony, Rep. Curt Cobb, a Shelbyville Democrat, said lawmakers would reconvene later "and come up with some recommendations, or not." Three days later, he received a $500 campaign contribution from the political action committee of Tullahoma-based payday lender 3D Financial, according to the PAC's most recent state campaign filing. Cobb said campaign contributions don't affect how he votes on bills, pointing out that he co-sponsored the 2005 legislation regulating the industry. He said he'd consider changes to the law, and that campaign contributions would not have any effect. "When I go in there, I try to keep an open mind," he said. "I don't try to base my decision off of things like that." Source: http://www.tennessean.com
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