By on December 13, 2008

Looking for higher returns? How about 25 percent! That’s right 25 percent a month, every month. Plus penalties. Plus fees. Plus the entire value of any car you repo and sell off. Not a bad deal for aspiring deca-millionaires if you ask me. The minus? Well, you have to spend a few of your crumbs to have a well funded lobbying group pay off the politicians. Welcome to the Title Pawn industry in the great state of GA, and yes, the repo side of this business is becoming absolutely huge at the auctions. Thousands of cars have been ‘involuntarily donated’ to a group of hyenas that would make Jesus remove his flip-flops and wear steel tipped boots. As for the rest of us dealers and auctioneers? We just get a first glimpse of the collateral damage that comes with a bad economy and a well-funded government.

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8 Comments on “Hammer Time: The Happy Hocker...”


  • avatar
    NICKNICK

    I’m not sure I understand what you mean by “collateral damage.” That usually implies the death of innocents or the destruction of their property. In the repo world, aren’t the cars being taken from people that haven’t made good on their loans? If they start “repoing” cars from the innocent, things are really, really going to get messy.

  • avatar
    Robert Frankfurter

    If you read carefully:

    http://www.responsiblelending.org/issues/cartitle/

    the you see that the so named “Title Pawn industry” sham is nothing more then legalization of robbery. The point is not that the poorest are aimed at (they fall pray since the pyramids where build), thats normal, the shame and very point is, that crooks by funneling pork through lobbying groups to politicians made embezzling perfect legal.

    Welcome to Orwells USA

  • avatar
    skor

    The explosion in the collections and repo businesses are a temporary phenomenon. These business are now working on the huge pile of wrecked debt created by irresponsible government/Wall Street. If you all haven’t noticed, that party is over.

    Credit isn’t as easy to come by anymore, what credit is extended, will go to people who are likely not to default — imagine that, responsible lending. Granted, it may take a few years to work through the backlog, but it’ll be slim pickin’s for the repo-man after that. I wouldn’t consider the repo/collections biz as a long term career option.

  • avatar
    NICKNICK

    Robert Frankfurter–
    I understand better now. I thought it was just normal repossession.

    Part of me feels bad for the people that “fall prey,” but the other part of me sees it as a potentially valuable service.

    The people that use this kind of service are the kind that nuked their credit rating long ago and are now operating in a personal junk bond status where they can’t otherwise secure a loan. If you make payday loans and car title loans illegal, these people will just borrow money the old fashioned way–the back alley abortion of loans: loansharking where the collateral is your legs. I know I’d rather lose my junk car title to one of these guys than lose my knees to a sledgehammer.

    The other option is to put a cap on lending rates, and some states do have these “usury” laws. If the natural market rate for someone with abysmal credit and a very high likelihood of default is 300% but you lend to them at 20%, guess what happens: your lending business will collapse as your default rates outstrip your collection rates. In effect, you’re a microcosm of the subprime mortgage meltdown. And in the states where “payday loans” are practically illegal through rate caps, these businesses dry up. Poor and desperate people are forced back to sledgehammer loansharking or theft to make ends meet.

    So what’ll it be? Your car title, your knees, or your freedom (prison on a burglary charge). There will always be people out there making bad decisions. Might as well give them the freedom to choose which wrong way they feel is best.

  • avatar
    John Horner

    One bit of deregulation which has been a big problem is the removal of usury laws. These laws used to put an upper cap on the maximum consumer interest which could be charged. Now those laws are gone, and we have passbook savings accounts paying less than 1% while credit card rates are routinely 18% and higher. The bank’s justification for these high rates is that they are suffering high losses … which is because credit is being given out in amounts and/or to people which shouldn’t be getting it.

    Bring back usury laws with reasonable interest rate caps and a whole bunch of crap goes away. Some argue this would hurt the poor, but what is really hurting the poor is a debt and interest cycle which has them spending an inordinate portion of their income on interest payments.

  • avatar
    KixStart

    One rule I’d like to see is a prohibition on raising a customer’s interest rate within 12 months of offering credit (raising the limit, for example, qualifies as offering credit) or attempting to sell the customer a new service.

    We see a situation where people who really are credit-worthy make a single mistake and it puts them on the road to credit hell. One late payment is often used as an excuse to jack rates beyond what the customer can actually pay. This leads to a cycle of trouble.

    I’m not saying people never make bad decisions but many of these problems aren’t solely because of the borrower.

  • avatar
    Steven Lang

    John’s absolutely correct. I have absolutely no qualms with having a title pawn industry, or any financial industry that uses assets as collateral for loans. However the interest rates should be capped at a far lower annual rate than 300+% AND the other ‘charges and fees’ should be eliminated.

    The way it stands now is that we have predatory folks who manipulate the system in order to screw as many people as possible. It’s their right to pursue that if they wish (as evidenced by the recent bailouts). But at the same time we should have laws in place that restrain the activities of these heartless folks.

    I’ve actually taken advantage of the title pawn phenomena by offering folks to pay off their loans in exchange for buying their car. Just got a 1998 Honda Prelude that way and the folks ended up with an $80 a week payment on a 2002 Ford Explorer. If they miss the payment and don’t tell me the truth (some of these folks do have honesty issues), I get MY vehicle back and that will be that. But at least this way they have daily transportation that does not require a usurious rate of interest.

    So far I’ve only had to repo one vehicle this year and no, this hadn’t been a substantial portion of my business until the economy started tanking in September. Before that time everyone I dealt with was a cash customer. As a side income, auto retailing has been very good to me. But that’s only because I primarily deal with customers who already know about the product and the history of the car beforehand. I publish the car’s history on the web and doing so makes the buying process a lot easier to handle.

  • avatar
    Landcrusher

    Gotta agree with Mr. Horner here as well.

    No surprise I suppose.

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