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Sandra Ahmedin, 65, was broke, and the rent was due. After deciding a car-title loan was her only option, the north St. Louis woman borrowed $800.

She's paid back close to four times that much, but she hasn't reduced the loan's principal. Although she stopped making payments — "I've paid enough already," she insisted — she fears the lender, Missouri Title Loans, will seize her 2001 Dodge Intrepid.

This wasn't supposed to happen in Missouri, say consumer advocates and lawyers representing borrowers such as Ahmedin. Nine years ago, legislators changed the state's title-loan law to limit how many times lenders can roll borrowers' debts into new, expensive loans. The aim was to keep borrowers from being trapped in a cycle of high-interest debt.

But Missouri Title Loans and dozens of its competitors have avoided those restrictions by classifying what seem to be title loans as different types of consumer loans that have less burdensome rules. And they do this even when the loans are marketed as title loans and companies bill themselves to consumers exclusively as title lenders.

Lawyers seeking to stop this practice say they believe state regulators have allowed lenders to overcharge thousands of Missouri consumers to the tune of hundreds, even thousands, of dollars each.

When borrowers such as Ahmedin sign up for a loan, they surrender their vehicle's title and a set of keys. If they don't pay, Missouri Title Loans can take the car.

Yet Ahmedin's debt, according to the lender and the state, isn't a title loan. It's a 'small loan" — a different type of consumer debt that, under Missouri law, comes with fewer safeguards.

Missouri Title Loans isn't unique.

More than 20 percent of Missouri's 298 licensed title lending locations — lenders must obtain a separate license for each office they operate — are licensed to deal in small loans, and about a third of the licensed title lenders also peddle installment loans.

And there are 115 other lenders with the word "title" in their names — companies such as Title Cash of Missouri, Title Lenders of Missouri, Title Loan Co. and TitleMax — that aren't licensed at all as title lenders. These companies deal exclusively in other, less regulated loan types.

According to Missouri regulators, there's nothing wrong with this. They say lenders can dole out short-term, high-interest loans in exchange for vehicle title and keys — the common definition of a title loan — but classify the loans as something else.

Because the companies aren't required to turn over annual lending data to the state, it's impossible to know how they classify their loans.

And, for borrowers, it's hard to recognize which loan type is being offered.

For instance, buried in the fine print of a Missouri Title Loans contract, there's just one clue indicating the product isn't a title loan: "This loan is being made pursuant to Missouri Revised Statute 367.100." (That refers to state law covering pawnbrokers and small loans; title loans are governed by the 367.500 statute.)

Lawyer John Campbell, who represents three Missouri Title Loans borrowers, said the company shouldn't be able to avoid restrictions on title loans by assigning them a different name.

"If it looks like a title loan, it smells like a title loan and it works like a title loan; it's a title loan," he said.

Part of Campbell's suit to end the practice recently was argued before the Missouri Supreme Court, and a decision there could come down as early as this week. At issue is whether a class action — either in front of a judge or an arbiter — can be brought against Missouri Title Loans, despite a clause in the loan agreement requiring individual arbitration.

That, Campbell said, would be a first step toward either getting a court to close the regulatory loophole or making it too costly for lenders to avoid the Title Loan Law.

With 28 licensed locations, Missouri Title Loans is a subsidiary of Community Loans of America, an Atlanta-based company that operates short-term loan shops across the country.

Terry Fields, a vice president at Community Loans, said someone at the company would return a reporter's call. No one did, and Fields' boss — President Robert Reich — did not respond to a request for comment.

NO DROP IN PRINCIPAL

Ahmedin receives about $900 per month from Social Security. In March, she turned to Missouri Title Loans to catch up on her rent payments, which Ahmedin says she couldn't pay because of medical bills.

She qualified for a one-month, $800 loan with a 300 percent annual interest rate. "They tried to get me to borrow more money, but I didn't need more."

When the loan came due a month later, Ahmedin paid $230 in interest but didn't have the money to pay back the principal. So she renewed the loan.

"Every time I would pay, it was like the loan wasn't going down at all," said Ahmedin, who had to cut back on groceries and skip other bills to pay the interest on loan renewals.

In total, she made at least 15 monthly payments before she stopped, according to records reviewed by the Post-Dispatch.

If Ahmedin's loan was a title loan — not a small loan — Missouri law would require the principal to shrink after the second renewal.

The principal of the third renewal — and any subsequent one — must drop by an amount equal to 10 percent of the first loan's principal.

The reason is simple: "The General Assembly has clearly indicated that no borrower is to be indebted to a title lender for any great period of time," the state regulations say.

But that's exactly what happened to Ahmedin. Because Missouri regulators accept the lender's classification of her loan as a small loan — not a title loan — she still owes Missouri Title, more than 27 months after first signing up.

Ahmedin's records show she paid Missouri Title Loans at least $3,100 in interest. That's more than Ahmedin said she originally paid for the car.

Her lawyer — Rob Swearingen, of the nonprofit Legal Services of Eastern Missouri — said that, had Ahmedin's loan been subject to the principal-reduction requirement, it would have been paid off in one year's time at a maximum cost of $2,606.

lenders 'pick and choose'

Without offering her car title as security, it's hard to imagine Ahmedin qualifying for a loan.

She doesn't work, own her home or have any other collateral. After paying rent and utilities, she has about $200 — not enough to pay one month's interest and stay current on other bills.

For both title loans and small loans, Missouri requires lenders to consider an applicant's ability to repay.

Yet Missouri Title Loans boasts about how easy it is to qualify for loans. For instance, the company brags that it never performs credit checks. "Drive in today, and you'll drive home with cash — it's that simple," says the company's website.

Regulators require lenders to collect borrowers' income information, but that's about it.

"Risk assessment is up to the lender based on a number of qualifiers which they themselves must choose," said Joe Crider of the Missouri Department of Insurance, Financial Institutions and Professional Registration.

Crider runs the department's Consumer Credit Section, which regulates about 2,700 finance companies, including banks and payday, title and small-loan lenders. He said there was nothing unusual, or illegal, about a company's marketing a loan as a title loan, taking a vehicle title as security and not being subject to the title-loan law.

"There's four or five different (type of) loans that can be made on a car," Crider said. "The lender can pick the license that it fits under."

Crider said some companies only offer title loans, despite their more restrictive regulations, because the businesses can't afford to maintain two licenses or because they specialize in loans less than $500, the minimum size of a small loan. He believes title loans — as classified by the state — generally are for between $300 and $500.

Missouri legislators legalized unlimited interest rates on small loans in the 1990s. Rates had been capped at 26.6 percent.

In 2001, just three years after Missouri established its title-loan law, then-Auditor Claire McCaskill issued a report criticizing it as ineffectual. The report said title-loan lenders "can pick and choose which statute serves them best without concern for consumer interests."

While the audit was in the works, legislators were re-writing the title loan law to include new disclosure language and the principal-reduction requirement. Initially, the goal was to close the regulatory loophole, said David Klarich, a lobbyist who, at the time, was a state senator and a sponsor of the legislation.

In that regard, the bill was a failure. The strengthened safeguards didn't mean much, because lenders still pick the regulatory regime they prefer.

COURT VS. ARBITRATION

Campbell, a class-action lawyer at downtown's Simon Law Firm, says the state's interpretation violates a basic legal principle: When something appears to be governed by conflicting laws, a newer and more specific statute trumps any older and more general provisions.

Just because a title-secured loan is large enough to qualify as a small loan doesn't mean it stops being a title loan, he said.

"To believe that the Legislature went through all the effort of passing a title loan law just to regulate loans less than $500 … It's nonsense."

Campbell's clients had experiences similar to Ahmedin's. One made two loan payments totaling about $1,147, but found that she had reduced the $2,215 principal by just six cents. The company enrolled another of Campbell's clients in a small loan that required him to pay $794 in one month, about $70 more than the borrower's monthly income from disability payments.

Lawyers such as Campbell and Swearingen think they would have a good shot at winning in court and forcing regulators to treat title-secured small loans as title loans. The problem, they say, is getting in front of a judge.

That's because loan agreements require borrowers to seek relief through arbitration, not the courts. Even if an arbiter rules in the borrower's favor, the ruling doesn't have the same power as one made from the bench. It doesn't develop case law.

The risk of losing in arbitration isn't much of a threat to a high-volume lender such as Missouri Title Loans.

That's because the loan agreements prohibit class arbitration. Like class-action suits in court, class arbitrations encourage lawyers to take small-dollar cases because clients can be bundled into large groups. That means lawyers representing consumers can put more resources into the case, and means they can expect a big pay-off if they win.

Without a lawyer, individuals may be reluctant to pay as much as $125 to start arbitration.

Campbell has filed a class-action suit against Missouri Title Loans, and he believes the company has illegally classified more than 10,000 title loans as small loans.

In 2008, St. Louis Circuit Court Judge David Dowd handed down a split ruling in that case. He said it can't move forward in court, as Campbell had pushed for; but he also ordered that the loan agreement's ban on class-action arbitration must be thrown out.

An appeals court upheld that ruling, and on May 19, Missouri Supreme Court judges heard arguments in the case.

Missouri Title Loans wants the court to allow only individual arbitration; Campbell wants the court to affirm the ruling in favor of class arbitration or to throw out arbitration entirely.

The court could hand down a ruling as early as Tuesday.

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