Loan Sharks Moving Into Michigan With Auto Title Loans
Michigan residents may soon be able to take out loans against their automobiles. The state Senate has a bill currently pending that would allow people to borrow money against their vehicles at loan shark interest rates – 300 percent annually.
As of now, these types of auto loans are not legal in Michigan because of the 1917 Pawnbrokers Act. However, this measure would amend the 100-year-old law and allow pawnbrokers to charge a “usage fee” of 20 percent on cash borrowed against automobiles...and the owner keeps possession of the car.
Interestingly, the bill is being sponsored by an out-of-state auto title company, which has some lawmakers concerned. If the law is passed, auto title loan companies will be able to disguise themselves as pawnbrokers and take advantage of people with hardcore financial troubles. For example, under the new law, a 12-month $1,000 auto title loan would cost the borrower $2,760 in interest, along with the principle $1,000.
These loans are easy to get, but if the borrower cannot pay back the money they lose their car.