Democrats who’ll take control of the Iowa Legislature’s debate agenda in January promise to pass a bill that would limit the interest rates companies can charge on so-called “car title loans.” Senator Joe Bolkcom, a Democrat from Iowa City, got the Iowa Senate to endorse a 21-percent-interest-rate limit on car title loans in each of the past two years, but the Republican-led Iowa House failed to take up the measure.
“Essentially over…the last decade, the legislature has sat on the sidelines and allowed these predators to have their way with hardworking Iowa families,” Bolkcom says. Representative Kevin McCarthy, a Democrat from Des Moines, will be the Majority Leader in the Iowa House in January and McCarthy promises the House will pass the bill to put an end to car title loans that charge as much as 360 percent interest.
“This practice is despicable,” McCarthy says. “It’s just plain wrong.” Outgoing House Speaker Christopher Rants, a Republican from Sioux City, refused to let the House pass limits on car title loans. Rants has defended car title loans as a necessary “tool” for low-income Iowans. McCarthy says he agrees that car title loans are a tool. “They are a tool — it’s a shovel that digs ’em deeper and deeper in debt,” McCarthy says.
Senator Bolkcom suggests legislators will also seek limits on the amount of interest that can be charged on so-called “Pay Day” loans. “Iowa has the distinction of leading the nation with the average number of total ‘Pay Day’ loans per customer being the highest in the nation at 12 loans per customer that use that service,” Bolkcom says. According to Bolkcom, that means borrowers are taking out new “Pay Day” loans to pay off their old loans, and getting in an unmanageable cycle. By law, banks and credit unions cannot charge more than 21 percent interest on consumer loans.
Iowa Attorney General Tom Miller, a Democrat, says there’s no defense for charging 360 percent interest on a loan when the borrower has put up their car as collateral.
“We’ve seen situations where people borrow $300 and owe $44.50 in interest in 15 days,” Miller says. “It’s a great deal for those in the business of making these loans and that’s why they fight so hard to maintain their position.” Miller says Iowa is among a handful of states which allow such “indefensible” interest rates on car title loans.