WDBJ7 Roanoke News and Weather NRV Lynchburg Danville | Franklin Co. man falls prey to payday lending loophole
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"I figured I'd be back to work and pay it back within six months at the most," says Michael Hall, an out of work contractor.
"You get into it, it sounds so easy. The advertising solicitations, if you need money for Christmas come on down (people don't even) realize what financial commitment they're making," says Delegate Dave Nutter.They're called car title loans. They're a quick way to get cash and a loophole around the controversial payday lending practice, a practice now regulated in Virginia.
Currently a special legislative committee has taken up the issue and in a recommendation later this year, the committee could ask state lawmakers to cap the interest on car titles loans.
Though for one man in Franklin County stricter legislation could come too late.
In December 2008 Michael Hall found himself out of a job as a contractor, which is why he ended up taking out a car title loan at a Rocky Mount lending company.
"I figured I'd be back to work and pay it back within six months at the most," says Hall.
But six months grew into nine months and what originally started out as a $5 thousand loan quickly spiraled out of control and nearly a year later, he's barely made a dent in his payment.
"After nine months of $515 payments, we still owe $34 hundred and then somehow or another they've raised it up to $47 hundred," explains Hall.
Hall's recently learned his lender raised the interest from roughly 120 to 180 percent even though he's been paying the minimum and on time. A practice perfectly legal.
Delegate Dave Nutter has been a vocal advocate for tougher legislation on Payday Lending. While different from car title loans, both of these are emergency loans that target cash strapped customers.
"You get into it, it sounds so easy. The advertising solicitations, if you need money for Christmas come on down (people don't even) realize what financial commitment they're making," says Nutter.
Hall says he was well aware of the commitment he made but still never thought his payments would balloon if he kept his end of the bargain by paying what he owed on time. But now with a debt that's snowballed, his truck could be repossessed any day. It's why Hall wants lawmakers to take a hard look and mandate regulation to close this predatory loophole for good.
