ST. CLAIR — St. Clair County Circuit Judge Charles Robinson Sr. struck down a provision of the Alabama Pawn Shop Act in a summary court ruling, saying it violates the Equal Protection Clause of the 14th Amendment of the Constitution.“It’s a big win for those who can’t afford conventional loans, like those from banks,” said Pell City attorney Erskine Funderburg, who helped represent James Waites in his case against Express Enterprises Inc.
Waites borrowed $400 using the title to his truck as collateral to buy medicine for his wife. He made nine consecutive monthly payments of $100, said Birmingham attorney Annesley DeGaris, who also represented Waites.
He said Waites, a resident of St. Clair County, refused to make any further payments after giving Express Enterprise $900, more than twice the amount he borrowed from the company.
DeGaris said the pawn shop, which contended Waites only made interest payments and never repaid the principal, repossessed his automobile and sold it, leaving Waites stranded.
“Alabama is one of the few states that allow predatory rates of this magnitude on car title loans,” DeGaris said. “The ruling by the court ends this predatory practice in Alabama. It is a positive step in protecting the rights of our state’s working families.”
In a court opinion, Robinson ruled in favor of the plaintiff, who asserted the Pawn Shop Act passed by Alabama legislators in 1975 violates equal protection laws of the Constitution.
The plaintiff in the case asserted the Alabama Pawn Shop Act allows pawn and title owners to charge interest rates of up to 300 percent annually, while Alabama law limits all other money lenders to maximum rates not exceeding 24 percent in a year.
Robinson wrote that the Alabama Pawn Shop Act ultimately discriminates against other lenders, as well as borrowers, “the very class for whom the Alabama small loan and usurious statutes were made to protect. …
“Therefore, the portion of the Alabama Pawn Shop Act that allows an interest rate charge of 25 percent per month on car title pawn must be struck down as a violation of equal protection,” Robinson wrote.
Funderburg said excessive interest rates on car title loans are prohibited in most states that surround Alabama.
“From the day Mr. Waites came to see me, I felt he had a case,” Funderburg said.
DeGaris said these title loans, which use titles as collateral, are short-term, high-interest loans structured to be repaid as a single payment after a short amount of time.
The loans are typically for small amounts – often for much less than the value of the vehicle that secures the loan – and are made without regard to the borrowers’ abilities to repay.
He said because title lenders call their loans “pawns,” in many instances they have not been subject to usury laws that would normally apply.
“Borrowers often cannot repay the full amounts on the date due, fall subject to excessive rates and are unable to keep up with the payments,” DeGaris said. “The lender then repossesses the car, taking away the borrower’s transportation and making it difficult for the borrower to keep a job.
“The unreasonably high interest rates which stem from car title loans exploit working families, often stripping them of their most valuable possessions.”
Efforts to reach attorneys for Express Enterprise Inc. were unsuccessful, but Funderburg said he expects attorneys for that company to appeal Robinson’s ruling.
Funderburg said the defendant has 42 days to file an appeal in the case.
