Predatory Lending

Some lenders can move around the Military Lending Act's restrictions by offering openended
credit loans instead of title loans or payday loans. This allows them to continue
charging triple-digit APR on their loans.
Some groups, such
as the Texas Fair
Lending Alliance,
present title loans
and payday loans
as a form of
entrapment, where
taking out one of
these means that
borrowers will find
themselves cycling
further into debt
with less chances of
getting out of debt
when compared to
not taking the loan
out at all,
contending that
75% of payday
loans are taken out
within two weeks of
the previous loan in
order to fill the gap
in finances from
when the loan was
originally taken out.
In 2001, Texas
passed a law
capping interest
rates on title loans
and payday loans.
However, lenders
are getting around
the restrictions by exploiting loopholes allowing them to lend for the same purposes,
with high-interest rates, disguised as loan brokers or as a Credit Services Organization
(CSO).
The Vice President of state policy at the Center for Responsible Lending in Durham,
North Carolina argues that the car title loan model is built around loans that are
impossible to repay. He goes on to cite a 2007 study by the Center for Responsible
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