Today I received a call from a young woman charged with “endangering a security interest.” O.C.G.A 16-5-51.
In Georgia, and throughout the United States, we allow legal loan sharks to charge poor people exorbitant rates of interest secured by their vehicles. This is commonly referred to as a title loan.
The interest “rate” is often listed as a smaller percentage, such as 15% paid monthly. What people do not understand is that 15% “monthly is an effective interest rate of 180% annually. The result is that a small loan can have interest payments that are almost twice the amount of the principal balance over the course of a year.
The further result is that people are trapped paying a monthly payment to the loan shark, while never reducing the principal balance.
HEY GEORGIA GENERAL ASSEMBLY!! THIS SHOULD BE ILLEGAL!!
Instead of worrying about someone smoking pot, how about worrying about title loan companies ruining the financial lives of people who ARE ALREADY DOWN ON THEIR LUCK AND IMPOVERISHED.
The young woman who called borrowed $1200, secured by her automobile. She paid well more than $1200 in interest and then lost her job. The title loan company demanded the car. She had moved and the car was no longer running.
Here is where it gets worse. The title loan company then used a stature designed to protect legitimate lenders (such as your local bank who may charge 4-7% annually for a car loan) to accuse her of Endangering a Security interest in Georgia.
The loan sharks have sought a warrant for her arrest for not paying them. Now, your bank would simply repossess the car. However, the title loan sharks want to make her suffer even more. They want to make sure the poor person will never find a job, because she is now a “criminal.”
The real issue here is why we allow loan sharking in Georgia. It is fair to charge people who have bad credit higher rates of interest, because they are more of a risk. With risk, there is greater cost because sometimes secured property must be repossessed.
That being said, NO ONE SHOULD BE PAYING 180% INTEREST ON A LOAN. If someone is a bad a credit risk, the loan should not be made. These title companies rope people into endless debt.
The real reason they want to jail this poor lady is not because she has wronged them. The real reason would be familiar to any other mob boss. They want to send a message to everyone else to either pay, or go to jail.
Tony Soprano would be proud.