Policy Context and Solutions
to Combat Predatory Lending
Although Georgia banned payday lending in 2004, title loans and high-cost installment loans continue to operate in the state. These lenders thrive in areas that lack traditional banking services and use high-interest loans to keep residents in debt and financial insecurity. Despite the payday lending ban, Georgia still allows interest rates of up to 60% annual percentage rates (APR) on small-dollar loans under the Georgia Industrial Loan Act.24
Georgia law permits high rates and fees on installment loans, while title loan providers are misclassified as pawn brokers and are allowed to charge triple-digit interest rates up to 300%.
Efforts to reform these practices have been minimal, even though neighboring states like North Carolina25 and Arkansas26 have passed stronger consumer protection laws, such as interest rate caps and bans on certain predatory practices. These inconsistencies create an uneven playing field where some states offer far more protection than others.27
Strict regulation aims to protect consumers from the predatory practices that often exploit financially vulnerable individuals. However, without complementary policies that expand access to safe, affordable financial products such regulations can inadvertently create a credit gap. Many individuals, particularly those in banking deserts or with poor credit histories, may have limited access to mainstream financial services and turn to these high-cost lenders out of necessity. When these options are restricted without alternatives, it leaves people with few or no options to cover emergency expenses, deepening financial instability.
To prevent this outcome, policies must be paired with solutions like expanded access to community-based lending programs, credit unions or other fair financial services that can meet the needs of low-income borrowers. The key is balancing consumer protection with access to affordable credit, ensuring that viable alternatives that promote long-term financial security accompany the removal of harmful financial products.
We join Georgia’s leading consumer advocacy organization, Georgia Watch, in recommending a comprehensive reform package that includes several critical changes. First, lenders should be required to assess a borrower’s ability to repay loans by evaluating both income and expenses, helping prevent borrowers from falling into debt traps. Additionally, car title lenders must be mandated to return any surplus generated from the sale of repossessed vehicles, ensuring that borrowers receive funds beyond what they owe. Furthermore, Georgia should rename the Industrial Loan Act as the “Small Consumer Finance Loan Act” and move car title lending under its jurisdiction, making these loans subject to state usury laws. Oversight of small-dollar lending, including car title loans, should be transferred to the Department of Banking and Finance to ensure more effective regulation. More detail on these recommendations can be found in Georgia Watch’s report titled, “Making Small-Dollar Lending Safer for Georgians.”28
The City of Atlanta and the State of Georgia should take up the following additional policy recommendations:
- Cap interest rates on title and installment loans. Implement a statewide interest rate cap of 36% APR or lower on all title loans and installment loans, aligning with successful reforms in Colorado and Illinois. Georgia Watch advocates for a 36% APR cap on title loans, which would protect borrowers from excessive interest rates that can exceed 180% APR. Justification: States like Colorado have implemented similar caps, reducing the cycle of debt for low-income borrowers, particularly in Black and underserved communities. The Georgia General Assembly can pass legislation to cap interest rates, providing critical consumer protections to vulnerable communities.
- Use zoning laws to limit the concentration of predatory institutions. Introduce zoning regulations in Atlanta and other municipalities to limit the density of predatory lenders in low-income neighborhoods. Zoning has been used successfully in cities like College Park to expressly prohibit title lender and check-cashing services in certain districts. This prevents predatory businesses from clustering in vulnerable areas, reducing their harmful impact. The Atlanta City Council should establish zoning ordinances that restrict the number of predatory institutions in certain areas and encourage businesses that offer healthier financial services, such as credit unions.
- Create a statewide Community Development Financial Institution Fund. Establish a Georgia Community Development Financial Institution (CDFI) Fund to provide affordable, low-interest loans to underserved communities. CDFIs offer responsible lending and financial services, filling the gap left by traditional financial institutions. Successful models exist in states like New York, which has expanded access to CDFIs to reduce reliance on predatory lenders. The Georgia Department of Banking and Finance can create a CDFI fund, encouraging local financial institutions to expand into low-income areas. Georgia already operates a CDFI program with a narrow focus on small businesses.
- Create a City of Atlanta-run Community Development Financial Institution expansion program. The CFDI should offer tax breaks, grant funding and provide low-cost loans to encourage CDFIs to open brick-and-mortar branches in historically redlined neighborhoods. This policy will attract mission-driven financial institutions that serve low-income and minority communities, providing critical access to affordable financial services. By incentivizing CDFIs to move into these areas, the city can help close the financial access divide while promoting local economic growth. CDFIs are proven to support underserved communities by offering low-interest loans, business financing and financial counseling. This approach mirrors successful initiatives like the New Markets Tax Credit (NMTC), which has helped finance CDFIs in economically distressed areas across the U.S..
- Strengthen enforcement against exploitative out-of-state and tribal lender loopholes. Tribal lenders often operate under a complex legal framework that allows them to claim sovereign immunity, meaning they are not always subject to state lending laws. This sovereignty stems from the federal recognition of Native American tribes as independent nations, which allows tribe-affiliated businesses to operate outside of state regulations. While some tribal lending operations are legitimate, others partner with non-tribal entities to skirt state usury laws and offer high-interest loans through online platforms. These relationships, sometimes referred to as “rent-a-tribe” schemes, can exploit both borrowers and the legal protections meant for tribes.
Conclusion
In conclusion, predatory institutions in Atlanta’s Black communities continue to perpetuate financial instability and widen the racial wealth divide.29 Installment lenders, title lenders and pawn shops actively extract wealth from vulnerable residents, limiting their economic mobility and trapping them in cycles of debt. These exploitative practices disproportionately target low-income communities and communities of color, deepening systemic inequities. To address this crisis, Georgia must take bold steps, such as capping interest rates on predatory loans, using zoning laws to reduce the concentration of predatory businesses and expanding access to affordable financial alternatives through CDFIs.
