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CFPB Finds One-in-Five Auto Title Loan Borrowers Have Repossessed Vehicles
The CFPB, on Wednesday, May 18, 2016 issued a report finding that one-in-five single-payment auto title loan borrowers have their vehicle seized by their lender for failure to repay. According to the CFPB’s research, more than four-in-five of these loans are renewed on their due date because borrowers cannot afford to repay. More than two-thirds of auto title loan business come from borrowers who have taken out seven or more consecutive loans and are stuck in debt for most of the year.
The CFPB study alleged these auto title loans have issues similar to payday loans, including high rates of consumer re-borrowing. According to the CFPB, such re-borrowing can trigger high costs in fees and interest and other collateral damage to a consumer’s life and finances. Specifically, the study found:
- One-in-five borrowers have their vehicle seized by the lender;
- Four-in-five auto title loans are not repaid in a single payment;
- More than half of auto title loans become long-term debt burdens; and
- Borrowers stuck in debt for seven months or more supply two-thirds of title loan business.