Loans based on auto titles are ensnaring people in debt by charging triple-digit interest rates, U.S. consumer activists say.

The Chicago Tribune reported Sunday that auto title loan providers typically charge 300 percent annual interest.

Of the 16 states that permit high-interest auto loans, only Illinois sets no limit on the interest rates, and it is the only state without a single consumer protection linked to auto title loans, the Woodstock Institute, a Chicago-based community think tank says.

In Illinois auto title loans are absolutely unregulated. And that creates a cowboy mentality. They think they can get away with anything and often they do, said Alon Alop, a lawyer with Legal Assistance Foundation of Metropolitan Chicago.

Auto title loan firms do business online and often at twice the 300 percent annual rate charged at their stores,

the Consumer Federation of America says.

Bob Reich is president of Atlanta-based Community Loans of America, the largest U.S. provider of auto title loans, with stores in 30 states. He said if used responsibly, auto loans help consumers get short-term cash.

I don't think it is a burden if our product is used wisely, he said of the interest rates.

Bookmark this news