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Payday and car title loans need reform

By Rabbi Gary S. Creditor When my wife and I applied for our first credit card, I waited with trepidation until it arrived. By the time we applied for our first car loan I had no doubt that we would be approved. When we applied for our home mortgage, I was also certain, but amazed at the amount of paperwork it involved and how much information was required. Never in our lives did we need short-term loans or have to give our car's title as collateral for a loan.

But for so many Virginians, their financial reality makes it impossible to obtain the loans and mortgages I received, so they must go to the nearest payday lender. Then, they often become trapped in a terrible scenario from which there is nearly no escape. In the commonwealth, payday and car title lenders are able to charge interest rates of 200 and 300 percent. While the borrowers intend for these to be short-term loans to tide them over during an emergency cash shortage, it often doesn't turn out that way. People who are already struggling to pay their grocery bills or keep the lights on end up paying more in interest and fees than the original amount they borrowed. For example, in Virginia, the average car title loan is $1,116 and the average repayment cost is $2,700. Virginia also has among the highest car repossessions rates in the country. Those in the weakest financial position are often driven deeper into poverty. For those who lose their car titles lose their means of transportation to work to earn money to repay the loans! Virginia has the dubious distinction of having one of the highest car repossession rates on title loans in the country, because our laws have unusually weak consumer protections.

Payday and car title loans need reform

Any cursory reading of scripture, particularly Leviticus and Deuteronomy, find many commandments whose ultimate goal is the alleviation of poverty and elevation of the poor to an equitable financial status.