Legislation supporters say will protect Iowans from unscrupulous lenders is on its way to the governor for his signature. The Iowa Senate voted 32-to-16 Monday night to limit the interest rate on so-called car title loans to 21-percent. Right now, some lenders are charging more than 300-percent. Senator Mark Zieman, a Republican from Postville, says driving car title lenders out of business will only end up hurting the very people this bill tries to protect.
Zieman says “There’s a need for this type of lending or I don’t think it would be out there. Where are these people going to go and get the loans they can’t get now? Why are these businesses flourishing?” Other Republicans, like Senator Jeff Angelo, of Creston, argued this will force car title lenders out of businesses, leaving Iowans who have bad credit with nowhere to get a loan.
Angelo says the bill will “shut out many people that are in dire need of this kind of financial help, the working class people who don’t have a chance to build credit or have bad credit.” Democrats say Iowans with poor credit would be better off getting a loan from friends or family members who won’t take their car if they can’t pay.
Senator Joe Bolkcom, a Democrat from Iowa City, says the current 300-percent interest rate is unnecessary and abusive when the lenders have your pink slip as collateral. Bolcom says “Wrecking someone’s credit is not a service to people. Making loans to people that can’t pay them back is not a service.”
Bolcom says the predatory lenders are having a significant negative impact on hundreds of Iowa families. Bolkcom says in 2005, more than 1,000 Iowans lost their cars after defaulting on a car title loan. The legislation now goes to the governor who is expected to sign it.