Michelle Lecours

Contributing Writer

 

After 10 years of an empty lot at one of the gateway corners of the
Wrigley neighborhood, Pennbrooke Financial Services, a high-interest
auto-title loan company, is the top contender to set up shop at the
northwest corner of Pacific Avenue and Pacific Coast Highway.

According to an April memo distributed by
6th District Councilmember Dee Andrews’s office, the property at Pacific
Avenue and PCH has been empty for over a decade. For the last five
years, the Long Beach Redevelopment Agency tried to attract new retail,
and among those interested were Shoe City, Prepaid Cell Phone Store,
Indoor Swap Meet and Family Saver. However, they were declined by the
owner as not being suitable establishments for the location.

The 6th District office worked to attract interest from larger
corporations such as Fresh & Easy, Starbucks, Coffee Bean & Tea
Leaf and In-N-Out Burger, but they all rejected the location for various
reasons including realignment, saturation and store closings in
California.

Enter Pennbrooke Financial Services

As the second-largest auto-title loan company in the country, Pennbrooke
has over 500 locations under different names in 22 states, Puerto Rico
and the United Kingdom. At present, it has no stores in California but
is actively working to open several locations, including in Whittier,
Corona and Long Beach. Two of those sites are set for Long Beach: one
location in north Long Beach at South Street and Paramount Boulevard,
and a second in the Wrigley neighborhood at the northwest corner of
Pacific Avenue and PCH.

How an auto-title loan works

At the Wrigley Association meeting on Monday, David Carlat, lobbyist and
land-use specialist hired by Pennbrooke, said auto-title loans are
basically short-term “bridge loans” designed to help the small-business
owner who needs capital to get out of a bind. “The loans will start at
$2,500 and go to about $25,000 and are issued on clear titles of
vehicles only,” said Carlat. “The target customer is typically a
small-business [owner] or independent contractor or someone who has a
vehicle such as a work truck or food truck. These loans are no less than
$2,500, which means the vehicle must be worth at least $5,000 and they
are only given on cars with a clear title.”

The interest is applied as daily simple interest based on the number of
days for which one has the loan. After 30 days, it is renewable for an
additional 30-day period if the interest has been paid on the first 30
days, according to Carlat. He said Pennbrooke’s starting rate in
California calculates to one-third of one percent a day, which means
that a borrower who gets a $2,500 loan on a vehicle will owe $8.25 per
day until that loan is paid off. “They’re daily loans on a daily
interest rate,” Carlat said. “They’re not compounded… and are almost
never longer than four months.”

That annual percentage rate calculates out to a 120-percent APR.
However, Pennbrooke may change the interest rate at anytime, according
to Carlat. “Based on prevailing business and competition, that rate may
go up or down depending on their competition,” he said.

Carlat claims that there is only one fee other than simple interest, and
that is the cost to the State to record the title. “I’ve been told it’s
like a $26 fee,” Carlat said. “There are no prepayment penalties or
upfront fees of any kind.”

Some Wrigley residents are opposed to having this type of institution in
their neighborhood because they say the high-interest loan structure is
bad for their community. One responder said, “So at the end of the
month I can either pay $255 to renew to the next month or I can pay
$2,755. What is that person who needs that loan to begin with more
likely to do? Pay that $255 and create a cycle of debt.”

 

“Banking center” façade and security

In the same memo, Councilmember Andrews’s office states that if
Pennbrooke opens business at this location the office will require a
professional façade that looks similar to a “banking center.” Cameras
will be installed on the exterior to “aid in four-corner safety and keep
an eye on Eddie’s Liquor,” the memo reads. Long Beach Police Department
will be connected and able to view live surveillance of the location.

John M. Edmond, Andrews’s chief of staff, said the City of Long Beach
has adopted design guidelines for all retailers to utilize. “What we are
trying to do over time is to sort of beautify the façades of all the
businesses that come into the central area,” Edmond said.

Edmond also said Andrews’s office wants to impose conditions on the
business that would help improve neighborhood security. “We want them to
get the closed-circuit TV because that puts eyes on the street where
police can’t be or have time to get to so they can assess (a crime)
situation before they get there,” Edmond said. “If we can have a camera
on Eddie’s 24/7 from a place across the street, that will substantially
help law-enforcement.”

Pennbrooke’s legal troubles and California’s AB 336

Pennbrooke conducts business under the company name Loan Max in the
state of Virginia. In 2009, Loan Max and a second lender, Cash Point,
were sued by the District of Columbia for actively soliciting D.C.
residents from Virginia. The Washington Post reported that D.C. Attorney
General Peter Nickles said, “These companies were charging annual
interest rates of about 300 percent and taking the titles of people’s
automobile, and if somebody fell behind, they would auction off their
cars.” In that lawsuit, Loan Max and Cash Point agreed to pay more than
$1 million to hundreds of D.C. residents who had lost their cars and had
paid thousands of dollars in interest for auto loans.

California Assemblymember Roger Dickinson (D-Sacramento), who introduced
AB 336 to regulate high-interest auto-title loans, had his bill shot
down in January by the Assembly Banking and Finance Committee. That
legislation would have required additional disclosure conditions to the
borrower, specifically to be named a “high-interest loan” as well as a
complete amortization schedule of the life of the loan. In addition,
lenders would be required to verify the borrower’s credit and would not
be able to finance loans when the payments would be in excess of 50
percent of the monthly income of the borrower.

“They make money on getting paid on the loan or they make money on
taking the car and selling it,” Dickinson said. “In fact, to a certain
extent, they probably make money on both because the chances are that
someone will take the loan out and at least make some payments before
they can’t make (the payments) any longer and then the car is seized. So
the lender gets the benefits of the payments made plus the resale of
the car after it’s repossessed.”

Carlat says those are not Pennbrooke’s policies. “If the cost of the
sale of the car does not cover the cost of the loan, Pennbrooke does not
go after [the borrower] for the cost of the balance,” Carlat said. “If
there’s more money from the sale of the vehicle than is owed,
[Pennbrooke would] redeem 100 percent of that back to the customer.”

When asked why opponents to AB 336 support this type of loan, Dickinson
said, “The point of view that some (Assembly) members have is that these
financial products such as payday loans and auto title loans are the
only thing that’s available in terms of credit or lending to
lower-income consumers,” said Dickinson. “There’s a universe of people
who can’t get, for one reason or another, credit or borrow funds through
the more typical channels such as banks or credit unions. They can’t go
to a bank or credit union and get a loan. If they can’t get something
like an auto-title loan, then they won’t be able to afford to get their
car repaired and they’ll lose their job, and that’s even worse than
getting a loan where you pay 200-percent interest.”

Carlat disagrees that auto-title loans target financially challenged
citizens. “Most poor people don’t own their vehicle outright and have at
least $5,000 equity [in their vehicle],” Carlat said. “So it’s
certainly not targeting low-income people.”

Resident Lisa Wibroe is opposed to Pennbrooke moving to this Wrigley
gateway location, and she created a petition for Wrigley residents as a
preventative measure. “Wrigley was hard-hit with the mortgage fiasco,”
she said. “Everybody knows where there’s an empty home in this
neighborhood, and it’s done nothing but lower our property values, and
we’re trying to look for businesses to elevate ourselves and make our
property values come back up again. I don’t believe that this business
will do so.”

At Monday’s meeting, another resident reminded neighbors how that area
had been hard-hit by the L.A. riots 20 years ago and that there had been
two banks there. “One of them is now a dollar store, and the other is a
laundromat,” she said. “And many of you remember we lost our DMV
building. It was burned down right here, and that took a lot of business
out of this area. For 20 years we have been working very hard to bring
this neighborhood back. A key element is that we need businesses that we
use. I don’t understand why here we are 20 years later talking about a
business we wouldn’t have considered then. We’re supposed to have
progressed.”