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Legislation to regulate high-interest loans in which borrowers use their vehicles as collateral died this week in the Assembly.

Assemblyman Roger Dickinson, D-Sacramento, said he was disappointed by the Assembly Banking and Finance Committee's rejection of his Assembly Bill 336 but will try again next year.

"(AB 336) would have offered at least some minimal protections to consumers for these loans, which have outrageous interest rates," he said.

Dickinson's bill targeted loans offered at annual interest rates ranging from 72 percent to 180 percent to car owners who have very low credit scores, need quick cash, and have few other options for borrowing money.

Lenders take title to the borrower's car as collateral and typically loan less money than the vehicle is worth. Thus, lenders are left with little financial risk because they benefit whether the borrower pays or the car is repossessed, Dickinson said.

State law does not restrict the interest rates charged on car-title loans of more than $2,.500.

AB 336 would have imposed additional disclosure requirements on lenders, including informing borrowers of total costs over the life of the loan. The bill also would have banned structuring car-title loans as a combination sale and leaseback.

Under Dickinson's measure, lenders would have been barred from making such loans if payments would exceed 50 percent of a borrower's gross monthly income.

Opponents of AB 336 contended that cracking down on car-title loans would leave borrowers with few other options and that high interest rates were necessary, in part, to cover costs of repossessing, handling and selling vehicles when defaults occur.


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