Title lending as a predatory practice: Subprime populations and financial violence

Abstract

AbstractThe passage of the Dodd‐Frank Act in 2010 ushered in the most ambitious financial reforms since the Banking Act of 1933. The core of the Act centered on ensuring more consumer protections from predatory financial practices through the creation of the Consumer Financial Protection Bureau (CFPB), which provided federal oversight of fringe lenders that profited off of high‐interest loans such as payday and automobile title loans. Yet the current deregulatory environment being promoted by the Trump administration is once again loosening the reins on fringe lenders that provide quick access to cash at triple digit interest rates. In this article, I provide an overview of the alternative finance service industry with a specific focus on one such instrument: auto title loans. Drawing upon governmental reports and the literature, I provide a comprehensive overview of the how the industry functions and who it targets. By focusing on the profit model that undergirds the title loan industry, I show how the profitability of the industry is directly tied to the extended vulnerability of its customer base. I conclude by offering suggestions for researchers to rethink predatory lending practices as a form of financial violence in order to reframe the discourse surrounding predatory lending.