[Congressional Record (Bound Edition), Volume 146 (2000), Part 9]
[House]
[Pages 12523-12525]
[From the U.S. 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.
  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.
  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.

[[Page 12524]]

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 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.

[[Page 12525]]

  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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