In 2011, Shelby B. from Rockdale, Georgia pawned her car title in exchange for $1,700. Four years and $5,400 later, she finally made the last payment to get her title back. Shelby, like many Georgians, took out a small-dollar loan and suffered financial consequences that far exceeded her expectations. “They get you in there by making it seem so easy,” Shelby said. “I was in a place in my life where I needed help, and they take advantage of people in tight positions…It’s a shame that they do that.”

Predatory small-dollar lenders prey on financially insecure consumers by providing quick cash loans with punishingly high interest rates and fees, making them all but impossible to pay on time. Of the over 750 title lenders operating in Georgia, 74.4% operate in areas with poverty rates above the national average. These lenders have historically targeted vulnerable populations – such as lower-income Black and Hispanic communities and military servicemembers – consumers who may have low financial literacy and often live paycheck to paycheck.

In conjunction with the 80-member Georgia Financial Protection Coalition, Georgia Watch produced “Making Small-Dollar Lending Safer for Georgians,” a policy paper examining small-dollar lending practices in Georgia and recommending state-level policy changes. “We have an incredible opportunity to strengthen consumer protections in Georgia and ease the financial burdens of our most vulnerable by reforming our small-dollar lending laws,” said Beth Stephens, Senior Director of Public Policy and Advocacy for Georgia Watch.

This paper takes an in-depth look at the types of small-dollar lending transactions permitted in Georgia, how they are regulated, and who predatory lenders target. In the paper, Georgia Watch and the Georgia Financial Protection Coalition recommend changes to state law that will protect consumers, laying the groundwork for the advocacy efforts of the Georgia Financial Protection Coalition. These recommended reforms include:

• Requiring small-dollar lenders to evaluate a borrower’s ability to repay before a loan is made—including an analysis of the borrower’s income and expenses;
• Requiring car title lenders to give a borrower any surplus remaining after the sale of a repossessed vehicle;
• Renaming the Industrial Loan Act the “Small Consumer Finance Loan Act” and moving car title lending under this Act so that title pawn transactions are regulated as small-dollar loans subject to Georgia’s usury law;
• Transferring authority to govern small-dollar loans, including car title loans, to the Department of Banking and Finance, rather than the Department of Insurance;
• Capping interest rates on small-dollar loans at 36% APR for all consumers to reflect the federal interest rate cap for military servicemembers and their families.

Please read “Making Small-Dollar Lending Safer for Georgians,” get agitated, and get involved! Contact Beth Stephens, Senior Director of Public Policy & Advocacy, if you want to join the Georgia Financial Protection Coalition: bstephens@georgiawatch.org.