DES MOINES, Iowa -- Car title loan lenders in Iowa will soon be required to cap loans at 21% thanks to a newly-signed law.
On March 27, Iowa Governor Chet Culver signed into law the Car Title Loan bill, which puts a 21% annual percentage rate limit on loans secured by a certificate of title to a motor vehicle.
House File 5 bill essentially caps the interest rate car title lenders can charge consumers. Culver said car title lenders are currently free to operate under an unintended loophole in Iowa law that allows them to charge interest rates sometimes as high as 300%.
"For far too long, car title lenders have preyed upon the most vulnerable Iowans. Due to the nature of the system, the Iowans who utilize their services often have the most difficulty paying back the loans due to financial limitations," Culver said.
Iowa Rep. Bob Kressig (D-Cedar Falls), who is also a director at $1.1 billion Veridian Credit Union, said he has supported the bill since it was introduced last year and hopes the new law will drive car title loan lenders out of the state.
The law will take effect July 1.