Each year, thousands of consumers lose their vehicles – often their largest asset – after taking out small-dollar, high-interest auto title loans to cover expenses. Despite hundreds of attempts by lawmakers to rein in the often predatory auto title market, generous campaign donations from the industry’s leaders have created a cycle in which consumers are plunged deeper into debt, while title lenders continue lining their pocketbooks. 

A new report from the Center for Public Integrity highlights the struggle lawmakers and regulators encounter in their attempts to reform the often predatory title lending industry.

Title lending, legal in nearly half of U.S. states, allows consumers to put up their car title as collateral for a short-term, small-dollar loan. Like payday loans, borrowers are required to repay their debt – which increases dramatically thanks to three-digit interest rates – in just a few weeks.

When borrowers repay the loans they are often persuaded to simply take out a second. In some instances when they can’t repay their loans, they can elect to roll over the debt for a fee.

Although lenders claim their loans provide a needed financial service, borrowers who can’t repay their obligations often lose more than just a few thousand dollars; they lose their means to obtain financial independence — their vehicles.

While officials with title loan companies assure Public Integrity that repossessing vehicles is a “last resort,” records show that in New Mexico, Missouri, Virginia, and Tennessee, lenders reported a total of 50,055 repossession in 2013. The following year, 42,905 repossessions occurred, but that figure doesn’t include Tennessee seizures, as the state won’t release those numbers until next year.

Lawmakers, regulators, and consumer advocates have worked to protect consumers from losing their vehicles by fighting for reform in the title loan industry. However, most of those attempts have been rebuffed, according to the Center for Public Integrity.

That’s because the title lending industry has strong roots with both state and national lawmakers. In fact, since 2011, about 150 bills to cap interest rates – essentially putting an end to title loans as they operate now – died in 20 state legislatures thanks to millions of dollars in campaign contributions.

According to the Center for Public Integrity, three title lenders combined to provide $9.1 million in campaign contributions during the past decade.

Of those companies, the biggest donor – providing $4 million – was the operator of stores like LoanMax, Midwest Title Loans and others. TitleMax was the second largest contributor providing $3.8 million in donations, followed by Community Loans of America – the operator of Fast Auto Loans – with $1.3 million in donations.

In Virginia, the three title lending companies issued $1.5 million in campaign contributions in the past decade. In just the last year, five bills to reform the industry have failed.

Similar contributions and failed bills have occurred in other states including Tennessee where more than two dozen pieces of legislation never saw the light of day.

In New Mexico, Senator William P. Soules introduced a measure in 2014 that would cap title loan interest rates at 36%.

The effort quickly lost steam, in part, he says because of the intense industry lobbying in the state.

“There’s big money being made off the very poorest and most vulnerable people in our state,” he tells the Center for Public Integrity.

Because such contributions generally keep legislation that could protect consumers from passing, the only option states have to rein in predatory title lending is through regulators related to consumer lending laws.

And while regulators have gone after title loan companies with fines and penalties for their unscrupulous behavior, the action does little to change the lending landscape.

For example, in Illinois, regulators issued 230 fines totaling $1.1 million between January 2014 and August 2014.

According to the Center for Public Integrity, in at least 46 states, title lenders were cited for making a loan with a “scheduled monthly payment exceeding 50% of the obligor’s gross monthly income.”

When fines don’t work, states have turned to the courts, but that option often drags on, leaving consumers struggling.

For example, a suit against Wisconsin Auto Title Loans lasted for nearly a decade before being settled in September 2013 with the company declining to admit fault and paying $2.27 million in restitution and fines.

The same situation occurred in 2011 in West Virginia, where the attorney general’s office investigated Fast Auto Loans’ debt collection tactics – repossessing more than 200 cars from West Virginia residents who had crossed into Virginia to get a loan, the Center for Public Integrity reports. That case dragged on for three years before being settled for $1.2 million.

Despite the long, drawn-out lawsuits many states file against title lenders for a slew of unscrupulous tactics, the real change won’t come until legislation is passed in states, many advocates say.

But that likely won’t happen with massive campaign contributions, not that some legislators have given up trying.

“It’s disgusting,” Tracy Creery, a Missouri Representative, who introduced a bill this year to limit interest rates on auto title loans to 36%, tells the Center for Public Integrity. “The vast majority of the legislature is willing to look the other way on the need for reform.”

Lawmakers protect title loan firms while borrowers pay sky-high interest rates [The Center for Public Integrity]

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