The Investigators

Jun 4, 2014 1:12 AM by Matthew Schwartz

N4T Investigators: Debt Trap?

Tucson - Taxi cab owner Jose Jimenez says he has an $800 auto title loan from the PLS store on Prince and Stone, and that he's paying back $100 every two weeks for six months. That's $1,200. The receipt for his last $100 payment showed the interest was $53.82.

Jimenez told the News 4 Tucson Investigators he needed the loan because, "I needed money for fixing my other car. Business is very low right now."

Delvin Davis, a senior research analyst with the Center for Responsible Lending, a non-profit agency that fights predatory lending, says title loans "make a bad situation worse."

Davis co-authored a scathing report CRL just published about title loans, saying a typical borrower pays twice as much in interest and fees than money received. CRL calls title loans a "quick financial fix that lead to long-term debt."

Here in Tucson, it only seems like there's a title loan business on every block. Title loan stores on the streets and online have flourished since pay day loans were outlawed in Arizona in 2010.

Arizona is among 16 states allowing title lending, with interest rates here allowed to be as high as 204 percent. All you need is your vehicle's title and proof of income. The store appraises your car, which is the collateral, and loans you a percentage of its value. You're supposed to pay it back within 30 days.

If you don't pay it back, you could lose your vehicle.

Nick LaFleur of the Better Business Bureau of Southern Arizona calls title loans a last resort for borrowers compared to mainstream loans. He notes that "If you don't pay it back you could lose your vehicle. We just caution consumers to be very careful and know what they're getting into."

Say you spend $500 on a credit card with an APR of 20%, you'll pay $8.22 in interest if you pay it back within 30 days. If you do a $500 title loan, with an interest rate of about 204%, you'll owe $85 plus the full $500 within 30 days. The problem is many title loan borrowers can't pay it back in 30 days. Under the threat of the borrower's car being repossessed, the lender rolls over the loan, and charges $85 interest again for another 30 days. The Center for Responsible lending says this cycle repeats itself on average nine times, resulting in $765 in interest for a $500 loan.

The CRL's Delvin Davis says, "They're taking advantage of a desperate situation for the consumer."

For some people who can't get money anywhere else, like Jose Jimenez, title loans might help, especially if they are paid back in full within 30 days.

"I know the interest rate is very high," Jimenez says, "but when you need money, you need to take the money, man."

The half-dozen title loan stores we called anonymously wouldn't give loan details over the phone, or answer even general questions, such as what their interest rate is. They all said to come to the store if you want the information. We also requested interviews from all six stores. Only one called back, and declined an on-camera interview. Let the borrower beware.

If you have a story you'd like us to investigate, email us at Or call our tip line, (520) 955-4444.


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