[Congressional Record Volume 146, Number 83 (Tuesday, June 27, 2000)]
[House]
[Pages H5179-H5181]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SENSE OF CONGRESS THAT STATES SHOULD MORE CLOSELY REGULATE TITLE PAWN
TRANSACTIONS AND OUTLAW IMPOSITION OF USURIOUS INTEREST RATES ON TITLE
LOANS TO CONSUMERS
Mrs. ROUKEMA. Mr. Speaker, I move to suspend the rules and agree to
the concurrent resolution (H. Con. Res. 312) expressing the sense of
the Congress that the States should more closely regulate title pawn
transactions and outlaw the imposition of usurious interest rates on
title loans to consumers, as amended.
[[Page H5180]]
The Clerk read as follows:
H. Con. Res. 312
Whereas title loan lenders make title loans and title pawns
to consumers by attaining the consumer's automobile title as
collateral;
Whereas these loans and pawns are often offered at
unscrupulously high rates of interest;
Whereas in many cases borrowers are forced to pay interest
rates of up to 300 percent per year;
Whereas many of these borrowers are unaware of applicable
rates and are forced into deeper and deeper debt to pay the
initial lien;
Whereas this industry takes advantage of uneducated and
poor consumers through usurious and exploitive lending
practices;
Whereas title loans and title pawns threaten the ability of
consumers to hold a job since default on the loan or pawn
will result in repossession and sale of their car, which is
often their only means of transportation to and from work;
Whereas this industry is expanding rapidly throughout the
United States;
Whereas both the Federal Government and States have
traditionally acted within their respective jurisdictions to
protect citizens from usurious lending and abusive credit
practices;
Whereas the spread of abusive lending practices, including
those often characteristic of title loan and title pawn
transactions, have recently resulted in heightened Federal
interest, at the congressional, executive, and regulatory
levels, in curbing predatory lending practices;
Whereas, as the result of extensive field hearings, a task
force established by the Secretary of the Treasury and the
Secretary of Housing and Urban Development has just
underscored the need for Federal legislation to curb
predatory lending;
Whereas the title loan and title pawn transaction problem
is particularly acute in Alabama, Georgia, Idaho, Illinois,
Minnesota, Mississippi, Missouri, Montana, Nevada, New
Hampshire, New Mexico, Oregon, South Carolina, South Dakota,
Tennessee, and Utah; and
Whereas this problem has the potential to spread to other
States that currently do not closely regulate the title loan
and title pawn industry: Now, therefore, be it
Resolved by the House of Representatives (the Senate
concurring), That it is the sense of Congress that the
Federal Government and the States should--
(1) engage in greater oversight of title loan and title
pawn transactions;
(2) work cooperatively to address the problem of abuses in
title loan and title pawn transactions through effective
legislation at both the Federal and State level, as
necessary, including by prohibiting title pawn transactions
and prohibiting usurious interest rates in title loan
transactions; and
(3) ensure that any Federal legislative effort preserves
the ability of the States to enact stronger protections for
consumers with respect to such transactions.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
New Jersey (Mrs. Roukema) and the gentleman from Pennsylvania (Mr.
Mascara) each will control 20 minutes.
The Chair recognizes the gentlewoman from New Jersey (Mrs. Roukema).
Mrs. ROUKEMA. Mr. Speaker, I yield myself such time as I may consume.
(Mrs. ROUKEMA asked and was given permission to revise and extend her
remarks.)
Mrs. ROUKEMA. Mr. Speaker, as chair of the Subcommittee on Financial
Institutions and Consumer Credit of the Committee on Banking and
Financial Services, I bring this to the floor, but I want to expressly
thank and recognize the gentleman from Florida (Mr. Shaw), who is the
original author of this concurrent resolution, and has brought before
us the increasing awareness of the usury problems associated with title
pawn and title loan industry.
{time} 1100
The resolution expresses the sense of Congress that the Federal
Government and the States should work together cooperatively to outlaw
title pawn transactions and the imposition of excessive interest rates.
Mr. Speaker, I yield such time as he may consume to the gentleman
from Florida (Mr. Shaw), the author of the resolution.
Mr. SHAW. Mr. Speaker, I thank the gentlewoman for yielding me this
time.
Mr. Speaker, House Concurrent Resolution 312 puts this Congress on
record as opposing the predatory and unscrupulous lending practices of
the title loan industry. As many of my colleagues are aware, abuse by
the title loan industry is an ever-increasing problem all across
America. These fringe banking services offer short-term loans to people
unable to borrow from traditional lending institutions, taking the
consumer's car, title and spare keys as collateral.
The interest rate on these loans which are usually not adequately
disclosed to the borrower are so exorbitant that debtors frequently
must take out additional loans just to pay the interest on the initial
lien, sending them deeper and deeper into debt. These rates can often
be as much as 300 percent, and, in some cases, even higher.
Take, for example, the blight of a Miami, Florida, resident whom I
will simply call John. As reported in the Miami Herald, John, in need
of cash to pay bills, borrowed $1,000, using the spare keys of his car
as collateral. Not fully aware of the terms of the loan, he was quickly
incapable of making the monthly interest-only payments of $220 and
subsequently took out additional loans just to pay the interest on the
initial loan. This amounts to an annual rate of nearly 350 percent. Now
knee-deep in debt and fearful that any day his car would be
repossessed, which would likely cost him his job, John struggled to pay
back what amounted to three times his initial loan. He eventually ended
up destitute and in a homeless shelter. Unfortunately, this one example
is not uncommon and reflects the cases of far too many Americans who
have found themselves trapped in an ever-worsening cycle of debt
because of the title loan industry.
As this industry spreads across this country, more and more States
are taking action to eliminate this type of institutional usury. Just
last month, in my home State, Florida, Governor Jeb Bush signed into
law legislation limiting the outrageous rates that loan companies in
Florida had been charging and limited it to 30 percent.
Nationwide recognition of this problem is needed. However, title loan
companies can circumvent prohibitions imposed by individual States by
crossing State lines and filing the proper paperwork in a State that
has yet to regulate this industry. The result is that loan companies
continue to spread like wildfire in States which are unregulated, and
more and more people find themselves swimming in outrageous debt. This
problem will persist until elected officials make the protection of
their constituents a priority and rein in this fringe industry.
Mr. Speaker, passage of this resolution will put those who engage in
this type of legal loan-sharking on notice that such predatory lending
practices will no longer be tolerated. Although a number of States like
Florida have stopped the title loan industry in its tracks, much
remains to be done and Congress may need to play a role. While
respecting the rights of the States to improve upon existing consumer
protection laws, H. Con. Res. 312 makes it clear that, if necessary,
Congress will take appropriate action to combat predatory lending
practices.
Mr. Speaker, H. Con. Res. 312 puts Congress on record as condemning
the practice of legal loan-sharking and opposing usury and unfair
lending practices. I urge my colleagues to take this opportunity to
express their concern for the consumer rights of their constituents and
support this resolution. This resolution goes to protect the most
vulnerable in our society from some of the most unscrupulous practices
in our society.
Mr. MASCARA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, today, the House takes up a bipartisan resolution, H.
Con. Res. 312, that, with the cooperation of its sponsor, the gentleman
from Florida (Mr. Shaw), we amend it in a way that I can support. This
resolution, as amended, expresses the sense of Congress that the
Federal Government and the States should work together to better
oversee abuses and unscrupulous practices of title loan and title pawn
lenders and that both levels of government should address the problem
with effective legislation, where necessary.
The resolution also urges that any Federal effort in this area should
preserve the ability of the States to enact stronger consumer
protection in this area. In fact, the State of Florida recently enacted
legislation sponsored by State Assemblyman Kendrick Meek of Miami whose
mother, the gentlewoman from Florida (Mrs. Meek), represents the 17th
District of Florida and is a cosponsor of this resolution.
Mr. Speaker, I am pleased to support this resolution which puts the
Congress on record as urging State and Federal
[[Page H5181]]
action to address the devastating consequences to consumers of the
predatory practices of title loan and title pawn lenders.
Our Nation is progressively being segmented into two separate,
unequal, financial service systems: one serving middle- and upper-
income individuals through mainstream financial institutions, and
another serving lower-income households through check-cashers and
pawnshops. This resolution sends the right message that Congress and
the States, as appropriate, must take action to protect the vulnerable
segment of the population who are preyed upon by unscrupulous lenders.
In many parts of our country, we are seeing the growth of title loan
and title pawn lenders as yet another class of fringe lenders who take
advantage of the lower-income consumers strapped for cash. Through
deceptive practices, title pawnshops and other title lenders too often
lure unwary consumers into using the title to their automobile and
trucks as security for loans equal to a fraction of the value of the
vehicle. Such loans typically carry interest rates in triple digits,
often around 300 percent on an annual basis. At such a high interest
rate, many of these borrowers are unable to pay off their loan and
their vehicles are repossessed. When these loans are structured as a
title pawn transaction, the title pawn broker sells the automobile and
retains transfer to the pawn broker. The consumer loses all of his or
her equity in the automobile and typically has little or no recourse to
regain the automobile.
As is the case for most Americans, these consumers depend on their
automobiles and trucks for transportation to their jobs, vital medical
appointments, and school for their children. So the loss of a vehicle
through an unfair foreclosure often results in the loss of a job or
other serious consequences.
Mr. Speaker, it is incumbent upon both Congress and the States to act
cooperatively with their respective jurisdictions to curb predatory
lending practices. The abuses in the title pawn and title loan industry
are just one of the areas which merit immediate and aggressive
legislative action. The Congress must take action to curb the abuses in
the title pawn and title loan industry. As the Clinton administration's
Task Force on Predatory Lending recently urged in its report, Congress
should enact new legislation in the title pawn and title loan industry.
Congress should begin to do that forthwith.
The joint HUD-Treasury Task Force also urged Congress to amend
existing laws to give borrowers more timely and more precise
information regarding the cost and terms of loans. I am hopeful that we
can work in a bipartisan fashion to enact legislation that will wipe
out predatory lending practices, regardless of where and how they
occur.
Mr. Speaker, I reserve the balance of my time.
Mrs. ROUKEMA. Mr. Speaker, I yield myself such time as I may consume.
This resolution expresses the sense of the Congress that the Federal
government and the States should work together cooperatively to outlaw
title pawn transactions and the imposition of excessive interest rates
on title loans. In these types of transactions, the business takes the
consumer's automobile title as collateral, often as part of a very
small pawn transaction or title loan. Abuses in title loans and title
pawn transactions often include excessively high interest rates and
other exploitive lending practices.
I want to note, in light of what the gentleman from Pennsylvania (Mr.
Mascara) has stated and certainly what the author of this amendment has
stated, I want to note that as the chairwoman of the Subcommittee on
Financial Institutions and Consumer Credit, I want to make the point
that we, on the committee, are continuing to study predatory lending.
The Committee on Banking and Financial Services recently held a hearing
on this very subject, and while title loan and title pawn transactions
are certainly a component of the practices that are considered
predatory, we are also considering what regulatory or legislative
changes might be needed on a broader scale; and I think our colleague
from Pennsylvania has referenced that possibility.
Clearly, cooperation among the Federal and State governments and
Federal and State regulators and the financial services industry is
critical and key. With respect to the abuses in the title pawn
transactions and the title loans and the lack of meaningful regulation
of this area in some States, the cooperation, as outlined and required
in this concurrent resolution, H. Con. Res. 312, is absolutely
necessary. A consistent set of rules must be applied and consumers
should not be taken advantage of because of weak laws or regulations in
a particular State.
Mr. Speaker, again, I want to thank the gentleman from Florida (Mr.
Shaw) for his leadership on this issue.
Mr. McCOLLUM. Mr. Speaker, I support H. Con. Res. 312, expressing the
sense of the Congress that the States should more closely regulate
title pawn transactions and outlaw the imposition of usurious interest
rates on title loans to consumers.
As a Floridian, I am acutely aware of the struggles in which the
citizens of Florida have engaged in order to rein in unscrupulous
practices and usurious interest rates on title loans. I am pleased that
the culmination of these efforts has lead to wise and judicious
legislation. I praise the Floridian approach of title lending because
it weighs both the importance of curbing the abuses that too often
surround title loan transactions against the importance of providing
otherwise ``un-lendable'' borrowers with access to credit. This
emergency credit can keep a small businessman from going under, or
cover immediate needs at the end of the month.
Starting October 1, 2000, the Florida Department of Banking and
Finance will begin to license and regulate title lenders in the state
of Florida. Among initial changes will be an annual interest rate cap
of 30%. Other improvements include empowering the Department of Banking
and Finance to impose fines and promulgate rules. For worst case
offenders, the Florida legislation establishes criminal penalties.
Furthermore, the Florida legislation does not preclude local
governments in the state of Florida from enacting more stringent
restriction. I firmly believe that democracy is best served when state
and local governments can exercise their informed judgement to serve
their citizens. This Sense of the Congress reiterates my concern both
for the abuses that have dogged title lending throughout several states
across the nation, but also my sincere wish that states will take up
this issue in their home legislative chambers.
I look forward to casting my vote for this excellent legislation,
sponsored by fellow Floridian, Clay Shaw, and I encourage my colleagues
from all 50 states to do the same.
Mr. SMITH of Michigan. Mr. Speaker, H. Con. Res. 312 calls on states
to more closely regulate certain types of loans and establish ceilings
on the rates of interest that can be charged for them. I oppose H.
Con., Res. 312 for two reasons.
The first is that regulation of lending markets, especially the
establishment of ceilings on interest rates, can harm those who most
need access to them. None of us can help but be appalled by
unscrupulous lenders who take advantage of needy borrowers. However,
the regulations encouraged by this resolution would most likely reduce
the number and availability of lenders.
As a member of the Michigan legislature, I remember that we attempted
to ``help'' people in a similar manner by restricting lending practices
and interest rates to what we consider a ``fair'' rate. The result
wasn't that interest rates were lowered. Instead, the borrowers came to
us and asked us to remove the restrictions because they couldn't get
loans any more. Mr. Speaker where there is competition, rates of
interest are best left to the marketplace rather than to the notions of
politicians.
Second, I find it odd that we in Washington need to tell the states
how they should handle what are traditionally local measures. We
certainly have no greater understanding of these issues than our
counterparts at the state level.
Mrs. ROUKEMA. Mr. Speaker, I yield back the balance of my time.
Mr. MASCARA. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. LaHood). The question is on the motion
offered by the gentlewoman from New Jersey (Mrs. Roukema) that the
House suspend the rules and agree to the concurrent resolution, H. Con.
Res. 312, as amended.
The question was taken.
Mrs. ROUKEMA. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
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