On September 11, Virginia Attorney General Mark Herring announced a crackdown on Virginia’s car-title loan industry. Car-title loans are made to borrowers who sign over their car titles as collateral, and are commonly made to individuals with poor credit histories in need of fast cash. Herring claims that such loans “are trapping a lot of people in a cycle of debt that they can’t get out of,” and that the loans had resulted in a surge of defaults and repossessions in Virginia in 2014.
Car-title loans are legal in approximately 20 states. The car-title industry was officially sanctioned in Virginia in 2010, and expanded in 2011 when the state approved loans to out-of-state customers. (Virginia’s densely populated neighbors – Maryland and the District of Columbia – do not permit such loans.) Herring’s office’s Consumer Protection Division has recently increased its focus on consumer lending in 2015, filing lawsuits against two Northern Virginia pawn shops allegedly operating without licenses to make car-title loans.
According to the Virginia State Corporation Commission, there are 466 car-title loan companies in Virginia, many of which opened after the state began restricting payday loans in 2009. In 2014, car title loans resulted in 38,286 defaults and 19,368 cars repossessed, of which 14,949 were sold at auction. According to Herring, the average interest rate for a car-title loan in Virginia was 222 percent in 2014, with most loans being made at the legal limit of 264 percent.
Although the attorney general position is frequently used as a stepping stone to a run for governor, Herring announced earlier this month that he will be running for re-election in 2017 instead.