Loan Sharks Circling Around Used-Car Buyers Lawmakers Show Little Interest In Fighting Usurious Practices

They’re college students, immigrants, newlyweds or unemployed loggers looking for work. They have one thing in common. They need a car but can’t get credit. That’s where the problem starts.

“The loan sharks are moving into Washington. What we have in this state right now is state-sanctioned loan-sharking for people who buy old beat-up cars at ridiculous interest rates and then get them repossessed,” Rep. Tom Campbell, R-Spanaway, said Monday.

He and Attorney General Christine Gregoire are among people fighting a losing battle at the Legislature to clamp down on what they say is a growing number of used-car dealers who sell old cars at hundreds of dollars over book value and at annual interest rates of 30 percent to 40 percent.

Gregoire and Campbell want lawmakers to reimpose on sellers of older, high-mileage cars a cap on interest rates they can charge. So far, the Senate has refused, and the House appears ready to follow suit on the measure, SB5406.

Lawmakers of both parties have sided with arguments that it is better to let the buyer beware than reinstate interest rate caps, even on fly-bynight car dealers.

“Maybe I don’t sound like a true liberal, but I asked myself how far do we go in protecting somebody, protecting a bad buyer,” said Senate Financial Institutions Chairwoman Margarita Prentice, D-Seattle, who is sponsoring the bill to permanently lift the cap on all installment purchases, including old used cars.

Les Thomas, R-Kent, Prentice’s House counterpart, said his committee is expected to endorse Prentice’s bill later this week. He said he would consider pushing for controls on oldcar dealers if the situation grows worse in coming years.

Lawmakers in 1992 temporarily lifted the cap on all retail installment sales. The cap was tied to fluctuations in federal treasury bills. The 1995 Legislature is heading toward passage of a measure to make the 1992 action permanent.

That’s fine with Gregoire and Campbell except in the case of old, high-mileage used cars.

“We’ve told the legislators that there has been no problem with lifting the cap for new cars, newerused cars, appliances, what have you. But there is a very big problem when it comes to these old, high mileage cars,” Gregoire said.

Her consumer protection staff has found that victims of usurious rates charged by a growing number of dealers include “people for whom English is a second language, newlyweds, unemployed loggers, people who are vulnerable.”

Paula Selis, an assistant attorney general, investigated car buyer complaints in 1993 and 1994 in the Tacoma area, and what she found was “shocking,” she said.

“People who purchase used cars from smaller lots using unconventional financing are paying much, much more than average buyers of used cars,” she said.