Brian J. O'Connor

Detroit News Finance Editor

On the same day that The Detroit News revealed that Senate Majority Leader Randy Richardville, R-Monroe, pushed a little-known bill through the lame duck session that would expose Michigan consumers to short-term loans with annual interest rates of nearly 300 percent, Richardville denied to reporters that the bill constitutes any kind of predatory lending.

“We don’t allow predatory lending,” Richardville told an informal meeting of reporters in Lansing on Tuesday, even though the Consumer Finance Protection Bureau and several consumer groups have all labeled the kind of auto title loans he’s backing as predatory and abusive.

The short-term auto-title loans aren’t legal in Michigan, but a bill introduced by Richardville on Nov. 6 would add a loophole to the state’s 1917 Pawnbrokers Act that would effectively let auto-title lenders enter the state by masquerading as pawnbrokers. An identical bill in the state House is sponsored by Livonia Republican John Walsh.

Michigan’s pawnshop law caps interest rates at 3 percent a month, or 36 percent annually, meaning that $1,000 borrowed for a year will cost a consumer $360 in interest after 12 months. Richardville’s bill would allow pawnbrokers to add a 20 percent monthly “usage fee” so that consumers could borrow against their cars and continue to drive them, at an annual interest rate of 276 percent. In that case, a 12-month, $1,000 auto title loan would cost the borrower $2,760 in interest, on top of the original $1,000 borrowed.

The U.S. Department of Defense has sought to outlaw such loans under the Military Lending Act, which caps interest rates at 36 percent annually. A November report from the Pentagon said that, “Predatory lending undermines military readiness” and “harms the morale of troops and their families.”

According to Washington, D.C., a non-partisan nonprofit Center for Responsible Lending, auto title loans are renewed an average of eight times, causing borrowers to pay more than twice the amount they borrowed in just interest. One in six auto title borrowers, the center said, loses their car to repossession. While the auto title business makes $1.9 billion in annual loans, those lenders rake in $4.3 billion in fees.

Richardville also denied to reporters that he is trying to ram the bill through the lame duck session, despite the fact that he introduced it two days after the November election and arranged for the bill to bypass a committee hearing and come directly to the state Senate floor where it could be voted on any day.

On Tuesday, Richardville said representatives for banks and credit unions are meeting with representatives in the pawn industry to see if they can reach a compromise on the legislation. He did not elaborate.

“I’ll know probably tomorrow if they can get that compromise or not,” Richardville said.

But Mark Aubrey of Warren-based Motor City Pawnbrokers and president of the Michigan Pawnbrokers Association — which opposes the bill — said his group has heard nothing about any accommodation on the bill, and isn’t interested in one.

“The Michigan Pawnbrokers Association has not been contacted by any agency for compromise,” Aubrey said in a statement. “There is no middle ground here. Title lending has no place in the Pawnbroker Act and no place in the pockets of Michigan’s consumers.”

The primary backer for the legislation, according to consumer and business lobbyists fighting the bill, is Georgia-based Select Management Resources, one of the nation’s largest auto-title lenders, owned by Roderick Aycox. According to Reuters, as of 2012 Aycox and his close associates had made nearly $1 million in campaign contributions to lawmakers in several states to promote his business interests, but didn’t specifically cite contributions to Michigan campaigns.

The Community Economic Development Association of Michigan and 50 other civic, financial, legal and consumer groups in Michigan oppose the measure, including Focus: HOPE, the Michigan State Bar Consumer Law Council, the Grandmont Rosedale Development Corp. and New Hope Baptist Church.

Richardville, who is term-limited and leaving office at year’s end, said the title loan bill wouldn’t be jammed through the lame duck session if it’s incomplete.

“If we’re not ready to vote on it, my move would be to wait until next year and let the next class deal with it,” he said.

The bill is No. 1138 in the Senate and No. 5954 in the House.

boconnor@detroitnews.com

(313) 222-2145

Chad Livengood contributed.