Senate leader: Auto title loan bill dead for year
Lansing — Legislation allowing Michiganians to borrow money against the value of their vehicles and be subject to triple-digit interest rates is dead for the year, Senate Majority Leader Randy Richardville said Thursday.
The proposed change to Michigan’s nearly 100-year-old pawnbrokers law would have allowed pawn shops to charge a 20 percent monthly “usage fee” on loans to customers who borrow money and continue driving their car.
Richardville, R-Monroe, said the Republican majority caucus was “uncomfortable voting on something they didn’t understand.”
“It came up so relatively recently,” Richardville said. “I didn’t get the time to explain it very well.”
Lobbying for and against the bill intensified this week after The Detroit News and other media outlets reported Tuesday about the legislation, which Richardville quietly introduced last month. Rep. John Walsh, R-Livonia, sponsored identical legislation in the House.
“I said all along that we’re not going to push things through this lame duck (session) just to push them through,” Richardville told reporters Thursday. He then added, jokingly: “Unless they’re politically expedient for me.”
Critics of the car title loan legislation have said it would fuel “predatory lending” and saddle borrowers with interest payments that could eventually exceed the amount they borrowed.
Michigan law sets pawnshop interest rates at 3 percent a month, meaning that $1,000 borrowed for a year will cost a consumer $360 in interest after 12 months.
Under Richardville’s legislation, pawnbrokers could add the 20 percent monthly usage fee for vehicles, meaning that a 12-month, $1,000 auto title loan would cost the borrower $2,760 in interest, on top of the original $1,000 borrowed.
The majority leader, who is term-limited and leaving office at year’s end, said he hopes the Legislature tackles the issue in the next term.
Richardville previously chaired the Senate’s banking committee and said government-regulated title loans are needed in Michigan.
“I believe that there’s a marketplace out there that’s missing a product,” he said.
firstname.lastname@example.org(517) 371-3660Detroit News Finance Columnist Brian J. O’Connor contributed.