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Car-Title Lenders Surge In Northern Virginia

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This recently opened LoanMax at the intersection of Route 1 and 
Fairhaven Avenue is the eighth car-title lender on the corridor. A ninth
 car-title lender will soon open at the intersection of Route 1 and 
Huntington Avenue.
WAMU Photo by Michael Pope
This recently opened LoanMax at the intersection of Route 1 and Fairhaven Avenue is the eighth car-title lender on the corridor. A ninth car-title lender will soon open at the intersection of Route 1 and Huntington Avenue.

In the last few weeks, drivers have noticed a subtle change at the intersection of Fairhaven Avenue and Route 1 in Northern Virginia. The palm-reading fortune teller who had this location for decades has closed up shop, and the building is now a LoanMax — the newest location of the growing car-title lending industry in Northern Virginia.

"We've been slowly trying to get higher quality economic development here, but simply to have a palm reader replaced by car-title lender isn't much of an upgrade," said Delegate Scott Surovell, who represents that part of Fairfax County in the House of Delegates. "What these guys do is government-authorized loan-sharking with the repo man acting in the role of Don Corleone. It's not the kind of business we want to be attracting to Virginia."

Car-title lenders offer the promise of quick cash for those willing to sign over the title to their automobiles. They are usually used by people with bad credit or no credit, which is why car-title lenders can get away with having a interest rates significantly higher than traditional banks. The legal limit is annualized interest rate of 264 percent, and most car-title lenders charge the maximum rate available. 

Three years ago, the General Assembly created a set of rules specifically for the industry. At the time, Delegate Terry Kilgore made a prediction.

"Under this law, Mr. Speaker, I will say the industry will not grow, but it will shrink," said Kilgore.

That prediction ended up being wrong — very wrong. At the time, Virginia had about 125 car-title lending locations. Since that time, the number has more than tripled to 400 locations — with new ones opening every month. Critics say part of the reason for that is General Assembly members adopted a controversial provision the following year allowing lenders to take out-of-state automobiles.

"The person, if they can read and they do not have any mental problems, are able to determine if this is a good choice for them or if this is a bad choice for them," said Delegate Dave Albo

"Car title loans are particularly damaging because when people lose their cars and when they lose their cars they lose their job," said Jay Speer, executive director of the Virginia Poverty Law Center in Richmond.

Last year, according to the State Corporation Commission, the industry made 160,000 loans and repossessed 13,000 cars.

In 2012, a total of 132,691 were issued, and the average borrower had 1.2 loans. The total number of individual borrowers who failed to make a monthly payment on a motor vehicle title loan for at least 60 days was 26,746. The total number of motor vehicles that were repossessed was 13,007, and the total number of repossessed motor vehicles that were sold by or on behalf of motor vehicle title licensees was 10,457.

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