ATLANTA - Title-loan companies probably will no longer be allowed to pocket huge profits from selling repossessed cars after the General Assembly completes its business this winter.
Far less certain is whether Georgia lawmakers will approve more far-reaching reform of an industry that has been both praised as offering a vital service and condemned as guilty of horrific abuses.
A House subcommittee will hold a hearing this week on two bills that offer far different approaches to title loans, typically short-term high-interest transactions in which people put up their cars as collateral in exchange for small sums of cash.
One of the measures, sponsored by five Republican members of the House Banks and Banking Committee, would require loan companies to refund any proceeds from repossessed cars that exceed what the customer owes.
The other House bill, a Democratic alternative, would go much further by also
prohibiting annual interest rates on title loans from exceeding 60 percent per year. Current law allows annual interest rates of up to 300 percent.
"It's a fraud to call consumer reform real reform if you don't cap the interest rate,'' said Rep. Mary Margaret Oliver, D-Decatur, chief sponsor of the Democratic bill. "I want real reform, not just the name.''
Oliver first introduced legislation aimed at the title-loan industry during the late 1990s but got little traction.
However, she said there's more interest among lawmakers now because of the industry's explosive growth.
"When so many people in Georgia don't have bank accounts (and) aren't creditworthy, devices like payday loans and title pawns emerge quickly with enormous profits,'' she said. "We have to be watchful that this practice doesn't abuse the working people of Georgia.''
The industry is cooperating with the move toward reform but only up to a point.
During a Senate hearing on the issue last July, representatives of several title-loan companies testified that they already are refunding excess proceeds from repossessions.
Phil Kent, spokesman for the Title Pawn Council of Georgia, said the industry supports the Republican bill addressing repossessed cars.
But Kent said capping interest rates would cripple a business that is popular with its customers.
"There a very high rate of repeats,'' he said. "That says something about the industry. People are happy or they wouldn't come back.''
Indeed, several satisfied customers testified at the Senate hearing that title-loan companies were the only place they could turn when they desperately needed money to tide them over.
But Georgia Watch, a statewide consumer advocacy group, also brought witnesses to that session with horror stories of short-term title loans that turned into a never-ending cycle of debt when they couldn't pay up right away.
"Triple-digit (interest) rates keep people in debt for a long time,'' said Danny Orrock, the organization's legislative coordinator. "We hope we can make changes that would make these loans safer for consumers.''
But Orrock and others who support caps on interest rates for title loans also emphasize that they don't want to run the industry out of Georgia.
"They serve a need for a segment of our population that can't get conventional loans,'' said Sen. Steen Miles, D-Decatur, sponsor of a Senate bill that - like Oliver's - would cap annual interest rates at 60 percent. "But we need to get some remedy for people having to deal with the burden of a 300-percent interest-rate loan.''
Orrock said he'd like to see legislation allowing borrowers who can't make good on their title loans after a brief period to repay the money through an installment plan. That would put some limit on the length of the loans, he said.
"I believe many abuses that come from these excessive interest rates come from long-term transactions,'' added
But Kent said borrowers need to be responsible for their debts.
"It's just like with a credit card,'' he said. "You have to keep up with the payments.''
Sen. Bill Hamrick, R-Carrollton, chairman of the Senate Banking and Financial Institutions Committee, predicted that his committee will get a title-loans bill to the Senate floor during the upcoming session, despite the sharp disagreement over how to approach the issue.
Miles, too, is "cautiously optimistic'' that lawmakers will take action.
"Reasonable people want to do the right thing,'' she said. "At the end of the day, we'll have some remedy for poor people ... who are having trouble getting by.''