This article was produced for ProPublica’s Local Reporting Network in partnership with The Current. Sign up for Dispatches to get stories like this one as soon as they are published.
When The Current and ProPublica began investigating the title lending industry in Georgia, we faced a daunting question: How do we measure an industry that nobody is tracking?
Title lenders provide quick cash in exchange for a car title as collateral. Many consumer advocates see the practice as predatory — title pawns, as they are known in Georgia, typically carry high interest rates, and borrowers can lose their car if they default. More than 30 states ban high-interest title lending entirely, but the industry is widespread in Georgia.
Title lenders in Georgia are considered pawn shops, a classification that exempts them from most state oversight and allows them to circumvent the state’s usury laws and charge up to 187.5% annual interest. While most financial institutions are regulated by the state’s Department of Banking and Finance, pawn shops are licensed by local governments, which have limited resources to monitor them.
State lawmakers on both sides of the aisle have tried for years to rein in title lending. But they have been stymied by the industry’s powerful lobbying efforts and by a lack of information.
Measuring the Scope of the Industry
To fill in the gaps, The Current and ProPublica started with a simple, but essential, task: counting the number of title lenders in the state.
Because there is no official statewide list of stores that offer “title pawns,” we turned to Google Maps and corporate websites. Ultimately, we found nearly 500 title pawn store locations, which span the majority of Georgia’s 159 counties.
We also found that these stores are disproportionately located in lower-income ZIP codes and those with higher proportions of people of color. These groups — who are more likely to lack access to other forms of credit — are the target customers for the title lending industry. Title lenders argue that they provide an essential service for communities that are underserved by other lenders, while critics say they ensnare these vulnerable borrowers in high-interest debt traps.
The Current and ProPublica also set out to measure the volume of title pawns in the state. While some states require title lenders to report how many loans they make, Georgia’s pawn shop statutes include no such mandate for statewide reporting.
But we identified an indirect way of tracking title pawns issued in the state: When customers take out title pawns, a lien is placed on their vehicle title, which gives the title lender an ownership interest that they can use to repossess the vehicle if customers default. This lien is registered with the Georgia Department of Revenue’s motor vehicle division.
After a series of discussions with the agency’s staff and filing multiple public records requests, we acquired a list of all electronic liens issued in the state from July 2019 through June 2022. Electronic liens accounted for around 95% of all liens issued in Georgia during this period. (The remaining 5% were handled with physical paperwork and tracked differently than the electronic liens.)
We cross-referenced the lienholders’ names and addresses in the data with our list of title lending store locations. During the three-year period, we found that Georgia title lenders placed liens on an average of more than 75,000 vehicles annually, and more than 60% of that volume came from TitleMax and TitleBucks, both operated by the Savannah-based TMX Finance, the largest title lender in the nation. These tallies likely underestimate how many title pawns are made, since the data we received only indicates the first electronic lien on a car from a specific lender and excludes cases where return customers received subsequent title pawns on the same vehicle from the same store.
The longer title pawns last, the higher the cost of borrowing: Even though title pawns have a 30-day term under state law, they can be renewed indefinitely as long as borrowers make the monthly interest payment. Unlike some other states that allow title lending, Georgia has no requirement that contracts can only be extended after portions of the principal balance are paid down.
After borrowers pay off title pawn debt or title lenders repossess the vehicle, the lien is removed from the title. By measuring the time from when the lien was issued to when it was removed, we could see about how long the borrowers were in debt. (It may take several days for the lien to be put in place after title pawn is issued and may similarly take some time for the lien to be removed after it is paid off.)
We found that at least 60% of the liens issued by TitleMax and TitleBucks from July 2019 through the end of 2021 were in place for six months or longer.
Our analysis may underestimate how long some customers were in debt because in certain circumstances electronic liens may be converted into paper liens, and the data we received only included the dates the liens were removed from the electronic system. It’s possible that in some cases a paper lien remained on the title after it was removed from the electronic system.
TMX Finance, the parent company of TitleMax, did not respond to requests for comment.
The Impact of a Legal Loophole
Faced with title pawn payments and other debts, some customers turn to bankruptcy as a last resort. Yet even in bankruptcy court, title lenders in Georgia have the upper hand.
In 2017, a federal appeals court ruling gave title lenders in the state a powerful legal loophole that allows them to demand that title pawns be repaid at their original high interest rates, instead of being subject to the lower-interest-rate repayment plans created in Chapter 13 bankruptcy proceedings. The ruling was based on the same state pawn shop laws that have enabled the industry to operate with little oversight.
Even though the loophole applies to all title lenders in the state, bankruptcy lawyers across Georgia told us that TitleMax customers feel its impact the most.
We wanted to get a broader picture of how this issue was affecting Georgians, but little information was publicly available about bankruptcies involving title lenders, so our first step was to identify which bankruptcy cases they’re involved in.
The federal electronic court record system, known as PACER, has information on which creditors are involved in a given bankruptcy case. But PACER charges a fee for every document viewed and cannot be comprehensively searched by creditor list, making it impractical for identifying every bankruptcy case with a title lender.
So The Current and ProPublica reached out to Georgia’s eight Chapter 13 bankruptcy trustees, who help facilitate bankruptcy cases and maintain data on cases within their jurisdiction. We received data from one bankruptcy trustee, Elaina Massey, whose jurisdiction covers 14 counties in southern Georgia: Appling, Atkinson, Bacon, Brantley, Camden, Charlton, Coffee, Glynn, Jeff Davis, Long, McIntosh, Pierce, Ware and Wayne. The data she sent us included Chapter 13 cases — a type of bankruptcy that puts the debtor on a repayment plan — where a title lender appeared as a creditor. These cases were identified by using searches for keywords including “title pawn” and the names of title lending companies.
We manually reviewed each case filed from 2020 to 2022 to determine whether title pawn debt was assigned to be paid through the repayment plan.
When title pawn debt is included in a bankruptcy plan, it can reduce the debtor’s burden significantly — debt paid through the plan during this period often had an annual interest rate of around 5%, while a title pawn paid outside the plan is likely subject to the initial contract terms, which can have an interest rate as high as 187.5% annually.
It can take several months for a repayment plan to be confirmed by a judge after the case is initially filed, and some cases are dismissed before the repayment plan is confirmed. Cases where the repayment plan was not confirmed by a judge as of April 2023 were excluded from the analysis.
Occasionally, a bankruptcy case listed a title lender as a creditor even though there wasn’t an active title pawn at the time of filing. These cases were excluded as well.
We grouped each case into one of three categories: ones where title pawn debts were included in the repayment plan, where title pawn debts were excluded from the repayment plan, or where the debtor gave up the vehicle. For the third category, it is generally unclear whether the debtor would have paid the title pawn through or outside the repayment plan.
The analysis included 142 cases total, two of which involved debt from TitleMax or TitleBucks along with debt from another title lender. In 58 of the 81 cases with debts from TitleMax, the debt was excluded from the repayment plan, meaning that the debtor was subject to the terms of the original title pawn contract. By contrast, title pawn debt was excluded from the plan in only 19 of the 63 cases involving other lenders.
In cases where the debt was excluded from the bankruptcy plan, court documents do not show whether the title lender negotiated a lower interest rate or other changes to the repayment terms outside of court. It also may not be clear from the court documents whether the debtor ultimately paid off the title pawn through direct payments or had their car repossessed.
We were also curious how many Georgians filing for bankruptcy were burdened by title pawn debt, and therefore how many people might be impacted by this loophole statewide.
To estimate this, we conducted a random sample of 1,000 Chapter 13 cases filed in Georgia from 2020 to 2022. Case numbers were sampled from the Federal Judicial Center’s bankruptcy database, which lists every bankruptcy case filed nationwide (but does not include creditor information). Then, we programmatically compiled creditor lists from the corresponding cases in PACER.
Of the 1,000 cases sampled, The Current and ProPublica found 64 cases where title lenders were listed as creditors, or 6.4%. We counted all cases that included title lenders as creditors, regardless of how the debt was treated in the plan.
Extrapolating across the roughly 39,000 cases filed during this period in Georgia, we estimated that roughly 2,500 bankruptcy cases involved title lenders from 2020 to 2022, with a margin of error of 600 cases, based on a 95% confidence interval. This time period coincided with a significant nationwide decline in bankruptcy filings during the pandemic, and therefore this estimate may be an undercount if the volume of bankruptcies return to their pre-pandemic levels in the future.
Mollie Simon contributed research.