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For immediate release – Tuesday, March 27, 2007.
Contact Bob Brammer – 515-281-6699.

Miller Hails Car-Title Loan Bill

Bill Signed into Law by Governor
Statement of Attorney General Tom Miller:

I’m elated that the Legislature passed an excellent bill and that Governor Culver is signing it today. This is a very important measure for consumers, and it was one of my highest priorities this year. And this is a crucial start on our overall goal of tackling predatory lending in Iowa on several fronts.

Car-title loans have astronomical and unjustified interest rates, typically 264% and sometimes 360%. On top of that, the consumer puts his or her car at risk – the car-title loan company takes a lien on the car and actually takes keys to the car to make repossession easier.

But Car-title loans are about the only kind of loans where the lender gets to have it both ways: the loans have astronomically high interest rates, and they are secured by the consumer’s car or truck. Consumers get a bad deal on both counts, while the loan company gets a great deal. It’s unfair, it’s unjust – and now it’s a thing of the past in Iowa.

I heartily applaud the Legislature and Gov. Culver for prohibiting such abusive and unconscionable rates for car-title loans.

[End of Miller statement.]

More Background on “Car-Title Loans”

Car-title loans are secured by the consumer’s automobile or truck. Lenders actually keep an extra set of keys to the vehicle – and may start repossessing a vehicle if a lender is delinquent in making one payment. The first payment is typically due in fifteen days. If even one payment is late, the lender after ten days may issue a ‘right to cure’ notice informing consumers that they are in default, and that if they don’t correct the default the vehicle will be repossessed in 20 days. (If the consumer makes the required payment but is delinquent again within a year, the lender is not required to provide the right to cure and may repossess after 10 days of delinquency.)

Miller said car-title lenders have attempted to avoid interest rate limitations by claiming the debt is open-ended credit, much like credit cards. Open-end credit was deregulated in Iowa because federal law let out-of-state card issuers export their home state no-cap interest laws.

Miller also noted that car-title loan companies charge very high interest, but they do not run a credit check in order to determine if a consumer is able to afford such a costly loan – because the loan is secured by a vehicle. “The one indicator of predatory lending that everybody agrees on is making a loan without regard to ability to pay,” he said.

“Indeed, with the first payment due just 15 days after the loan, it is very unlikely that the consumer who needed $300 15 days ago will have $344.55 just 15 days later to pay off the loan,” Miller said.

“The result is that most consumers are on the ‘down’ escalator as soon as they sign car-title loan papers,” he said. “It’s very risky to consumers, but the car-title loan company – with the vehicle as collateral – is risking little or nothing.”

Miller said that almost three out of four Americans (over 70%) live in states that prohibit car-title loans like those that had been offered in Iowa. “Those Americans still found credit. For almost 160 years Iowans found credit without these onerous transactions. You can’t tell me that the people of Texas, Arkansas and Louisiana are so much more resourceful than Iowans that they can secure credit without title loans and Iowans cannot,” he said.

“People who push these loans claim that capping the rate will kill the business and thereby deny an important ‘lending tool’ to lower-income Iowans. My view is that the loans were a tool, all right – a shovel that just dug most people deeper into debt,” he said.

“Iowa was out of step with the rest of the country by failing to protect consumers on car-title loans, but those days are over,” Miller said. “I commend the Legislature and Gov. Culver for providing this important protection to the people of Iowa.”


Governor Chet Culver signs bill regulating car-title loans.
Gov. Chet Culver signs bill regulating car-title loans.

Governor Culver thanks Attorney General Tom Miller for proposing Car-Title Loan bill.
Gov. Culver thanks Attorney General Tom Miller for proposing Car-Title Loan bill.


On the Web: www.IowaAttorneyGeneral.org.