Several Illinois lawmakers want added regulations on car title loans. They say some lenders charge interest rates in the triple digits, putting borrowers at risk of losing their cars.
In 2015, Springfield resident Billie Aschmeller took out a loan for $596 with a twenty-four-month limit to pay it back. But with a 304 percent interest rate, at the end of those two years, her total would be more than $3,000.
“I felt like a hamster on one of those wheels. I just kept running and running and never got anywhere and there was nowhere to turn. Sometimes I just don’t have the money, but they have my title, so I have to pay,” she says.
The so-called Fair Lending Act would regulate the car title loan industry by capping interest rates at 36 percent.
Rep. Christian Mitchell, a Chicago Democrat and a sponsor of the measure, says many borrowers are in Aschmeller’s situation: they can’t pay and will either take out additional loans or lose their vehicles.
“Something has to be done to protect those who are the most vulnerable who are taking these loans to try to cover vital expenses,” he says.
“We don’t need to be trapping people in a spiral of debt that eventually puts them off in a worse position than they were in the first place to seek this loan in the first instance.”
Aschmeller was living out of her car and says the stress of losing her only source of transportation and housing kept her in fear.
Mitchell says more regulation does not mean they want to ban the industry, as some other states have already done. He’s calling on lenders to be involved in the discussions as the measure moves forward.
Twenty-eight other states have either prohibited car title loans or capped their rates at 36 percent.