NH bill would drop cap on loans made on car titles
CONCORD, N.H. (AP) — Businesses offering short-term loans using vehicles as collateral would be restricted to a much lower cap on the interest rates they charge under a bill scheduled for a New Hampshire House committee hearing Thursday.
House Commerce Chairman Ed Butler, a Democrat from Harts Location, proposes reversing a GOP law that raised the amount that title loan lenders could charge to 25 percent a month. Butler wants to cap the rate at 36 percent a year — the rate in effect from 2009 until last year.
The Republican-controlled Legislature passed the bill into law over former Gov. John Lynch's veto. Lynch, a Democrat, had argued the bill allowed excessive interest rates — 300 percent a year — to be charged that would be detrimental to families, communities and the economy.
Democrats now control the House and are revisiting a number of laws passed by Republicans.
Supporters argue the higher cap provides more options for consumers who need short-term loans. They say New Hampshire should not be a "nanny state" and tell people how to live their lives. But Butler argues it puts people who are struggling in the dangerous position of losing title to their vehicles.
"The title is forfeit if you don't pay," Butler said. "For people already struggling, the loss of the ability to get to and from work can be very scary."
Sarah Mattson of New Hampshire Legal Assistance said people don't pay other expenses to avoid losing their vehicles in a rural state like New Hampshire where people rely heavily on cars.
"People will do just about everything they can to avoid repossession," she said.
Mattson said she researched what happened to title lenders after the 36 percent cap was put into law and found that the lenders continued to make small loans to consumers — though not using their vehicles as collateral. She said the lenders resumed making loans using vehicles as collateral after the rate was raised to 25 percent a month.
She could not give examples of people having their cars repossessed. She said Legal Assistance does not handle these types of cases now partly because their staff is smaller and partly because they can't file a complaint with the Banking Department because the law allows 300 percent in annual interest. She said the law also does not require the lenders to consider the consumer's ability to pay back the loan.