Thomasville — Since November 2002, Johnnie Bass has paid $4,400 on a $1,800 loan she secured with the title to her car.

And yet, she still owes as much as she borrowed.

ANN HARDIE/AJC (ENLARGE)
Johnnie Bass of Thomasville sits in her 1998 Ford Escort, the title for which she used to secure a loan that she can't manage to pay off. The Legislature is eyeing such lending deals.
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A combination of factors are keeping the retired nursing home aide trapped in debt: a triple-digit interest rate, a lender using a short-term financing arrangement for long-term gain, and the state of Georgia, which offers her no way out.

"It is about to drive me out of my mind," said Bass, 63, who has paid more in interest alone than her 1998 Ford Escort cost.

Bass' situation illustrates why Georgia, which gave birth to loans backed by car titles, is among the least forgiving states in the country to borrow money.

Georgia law allows title lenders to charge an annual percentage rate of up to 300 percent. State law defines the loans as 30-day pawn transactions, but they can be extended indefinitely.

The loan taken out by Bass, who can afford to pay only the interest and not the principal since illness forced her into early retirement, has been extended 28 times to date, her loan documents show.

Following a recent Atlanta Journal-Constitution series on how Georgia consistently stood out for its harsh treatment of borrowers, the Georgia General Assembly is revisiting the law authorizing title lending.

On Wednesday, state Rep. Mary Margaret Oliver (D-Decatur) introduced House Bill 675, which would distinguish traditional pawn transactions from those backed by car titles. It would limit the annual interest rate on title loans to 60 percent, a cap placed on most other consumer loans in Georgia.

This afternoon, at 1:30 in Room 450 of the state Capitol, a subcommittee will hold a public hearing on Senate Bill 198, which also would lower the interest rate to 60 percent a year.

The bill's sponsor, Sen. Steen Miles (D-Decatur), also plans to strengthen the bill by requiring title lenders to refund to borrowers any money left over after their cars are repossessed and sold.

Low on safeguards

Among the 24 states that permit title lending, Georgia is one of a handful that allow lenders to keep all the proceeds from the sale of repossessed cars, over and above the loan balance and expenses.

Even some states that permit high interest on title loans build in consumer protections not found in Georgia's law.

Neighboring South Carolina, for instance, allows lenders to set their own interest rates on loans greater than $600.

But in 2003, its legislature prohibited the monthly loans from being renewed more than six times. After that, the borrower has six months to pay off the principal without accruing additional interest.

"Otherwise, it just keeps going and going and going and going," said Danny Collins, deputy for regulatory enforcement with South Carolina's Department of Consumer Affairs.

"It didn't look like some consumers were going to be able to get out from under it unless we put a limit on how long the thing would last."

Seated at the dining room table of the small gray house she rents in Thomasville, not far from the Florida line, Bass says that Georgia needs to change the law to protect people like her.

When she borrowed from a TitleMax store in Valdosta two years ago, Bass was working in a nursing home caring for patients, making $8.50 an hour.

"I was behind on my rent, and it was real appetizing," said Bass, a well-kept woman who has supported herself since her divorce 20 years ago. "It sounded so good, and my credit was real bruised."

To borrow against her only real asset — a two-door black Escort that cost $2,735, which her son purchased for her just two weeks before she took out the loan — Bass had to turn over her car title and a spare set of keys so the company could repossess the car if she failed to pay.

At first, Bass was able to pay down a little of the principal, adding $20 here, $15 there on top of the interest payment. The interest charged by TitleMax computed to an annual rate ranging from 109 percent to 120 percent, her loan documents show.

Then, as Bass put it, she "started falling apart like an old car." High blood pressure, arthritis and liver cysts discovered during an early morning visit to the emergency room forced Bass to quit work and rely on Social Security.

Now, the first thing she does with the $500 government check that comes each month is send a $150 interest payment to TitleMax. That leaves Bass — whose grown children cover her rent — $350 for groceries, medicine, utilities, gas, car insurance, doctor bills and anything else that might arise.

Most months, a creditor or two gets shortchanged. Never TitleMax.

"If I don't pay, they are real quick to come get your car," said Bass, who needs hers for visits to the doctor and grocery store. "Sometimes when I paid them, I didn't have enough for my basic needs."

Pawn rules apply

Bass said she has tried unsuccessfully to persuade TitleMax, which is part of a Savannah-based chain with 250 stores in four states, to apply some of the interest toward the principal. "I don't have any trouble paying, just help me get it paid off," she said. "I've done overpaid the loan — and the car."

TitleMax owner and CEO Tracy Young said his company does "everything we can to get the consumer to pay on their transaction in a timely period."

He noted that TitleMax charges, at most, 12.5 percent a month for its loans, which computes to an annual rate of 150 percent. State law allows title lenders to charge up to 25 percent a month for the first three months and 12.5 percent after that.

"Is the rate too high? Yes, I agree the rate is too high," Young said of the interest allowed under the statute.

Not only does TitleMax charge less than most of his competitors, Young said, every borrower is given a plan to pay off their debt in six to 24 months, depending on the size of the loan.

"I clearly agree that it is not good for a consumer to continue to pay on something and never pay the principal," he said.

Young said that it's also important to remember that the transactions his company makes are pawns, not loans. That means TitleMax can't sue or garnishee the wages of customers who do not pay. He said every customer understands that missing a payment means losing the car. It's the same as pawning a diamond ring or a television, he said.

John Thomas, a lobbyist for Georgia's title pawn industry, said title loans never were intended for "long-term financing."

He called Bass' experience "an aberration that should not be allowed."

Georgia law does not prohibit what happened to Bass, either.

"There is a balance between keeping an industry profitable and not having abuses," he said. Thomas said he was aware that some states require that payments be applied to the principal after a certain period.

"Maybe we might should do that in a perfect world," he said.