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CBS4 Investigates Car Title Loans

BOSTON (CBS4) ― If you need some extra cash, we've got an important warning for you. It's about car title loans, offered by some companies that are taking advantage of weak state laws to drive you deeper into debt!

TV Ad: "We came to Loanmax Title Loans to get fast cash for our vacation, for an unexpected bill, to get cash back in my pocket."

All you have to do is hand over your car title and keys as collateral.

Joanne Horigan's 22-year-old son saw that ad and went to New Hampshire to take out a $1,000 loan. "He was between jobs and he was probably getting behind in his car insurance," said Joanne Horigan, a concerned parent.

She says her son had no idea how high the interest really was. "$500 on a $1000 loan in about six weeks. I think it's a disgrace. 372 percent annual rate, you just don't see that ever, in anything, except loan sharking."

"It is loan sharking, and some states permit it," said Elizabeth Renuart of the National Consumer Law Center.

That's why Elizabeth Renuart at the National Consumer Law Center in Boston is warning consumers about car title loans. "Consumers are not being told what the annual percentage rate is."

A report from the Consumer Federation of America suggests people are paying hundreds of dollars in interest for a short term fix that ends up driving them deeper into debt.

"When you gamble your transportation, you're gambling your livelihood," said Renuart.

Another problem: Even though it's illegal for these companies to charge such high interest in the Bay State, it's perfectly legal for them to do it in the Granite State due to weak state laws that don't cap interest rates. "In New Hampshire, the APR could be as high as the creditors will charge and consumers will pay," said Renuart.

Despite the critics, New Hampshire Banking Commissioner Peter Hildreth doesn't seem to think these loans are a bad deal. "We've seen them grow in popularity."

Last year alone, auto title lenders in New Hampshire granted more than $7 million in loans to cash strapped consumers.

"When people need to take out a loan for a reason that is crucial to them, there needs to be a channel for them to do that," said Hildreth.

And that doesn't sit well with consumers like Joanne Horigan. "It's terrible, and New Hampshire, shame on them for doing this."

Now there is a bill before the New Hampshire state legislature that would cap the interest rate on title loans at 100 percent, but consumer advocates say that proposal doesn't go far enough.

As for Loanmax, the company's attorney tells us these loans are a product their clients like and need, and their customers are fully informed about the risks.

(© MMVI, CBS Broadcasting Inc. All Rights Reserved.)