Maybe, but it won't likely become as widespread of a problem. For one thing, it's limited to owners of paid-off vehicles. But, like payday lending, loan terms encourage a cycle of borrowing from which many borrowers can't escape.

In fact, according to the DFI, Tennessee's 931 title lending outlets repossessed more than 17,000 vehicles in 2004. That's more than 17,000 households with one less way to get to work, school and medical appointments.

"The thing that payday lending and title pledge lending have in common is an uneducated consumer base that tends to get themselves in deep trouble, because they don't understand, or appreciate, how impossible it is to borrow their way out of debt," said David Wilson, executive vice president of Governmental Affairs for the Tennessee Credit Union League.

The state's Title Pledge Act still allows what many would consider to be predatory lending practices: lenders are allowed to charge up to 264% APR, and the 30-day maximum term can be renewed. According to a February 1, 2006 report from the Tennessee DFI, the average title loan rolls over seven times, and more than one-quarter of lenders surveyed by the agency were charging illegal fees.

And that's the good news.

At least Tennessee is quantifying the problem. According to the Department of Defense's 2006 Report on Predatory Lending Practices, Tennessee was one of only 22 states that had any laws or regulations in place that specifically addressed the title lending issue. Of the 22, only three states restricted annual percentage rates below 100 percent: Florida, Kentucky and Minnesota.

And in many states, even those that regulate the practice, title lenders operate under pawnshop rules, or structure loans to be open-ended or sale-lease backs, avoiding usury laws. Like payday lenders, title lenders actively lobby lawmakers to avoid restrictions. In Iowa, a state with virtually no restrictions on title lenders, Attorney General Tom Miller appealed to lawmakers in December to pass legislation restricting the practice. For the past two years, laws passed the state senate setting annual rate caps at 21 percent, but the bills died in the house due to pressure from title lender lobbyists.

Wilson said he's not concerned with the proposed bills in Tennessee, saying that from what he can ascertain, they all favor the consumer and would put title lenders more on par with what "credit unions would even consider doing."

"We don't take a specific position on a bill affecting a different industry unless there is some impact on credit unions, so these bills are ones that we're watching, but we're not actively engaged in them at this point," he said.

With all the recent discussions regarding credit unions and their role as an alternative to predatory lenders…NCUA Chair Joanne Johnson addressed this topic during her March 1 testimony before the U.S. House of Representatives Appropriations Subcommittee on Financial Services…what are credit unions doing to educate members and provide them with positive alternatives?

Clarksville, Tennessee-based Ft. Campbell Federal Credit Union, which includes Ft. Campbell Army base personnel in its field of membership, recently introduced an alternative to payday and title loans called Express Pay. The product allows members to borrow up to $500 without a credit check, as long as they have direct deposit coming in.

Not requiring a credit check is important to Express Pay's success, said Patty Spencer, Vice President of Lending for the $240 million FCFCU.

"For some people, the whole idea of getting credit pulled is intimidating, especially if they have poor credit. That's one of the reasons they turn to these lenders, because they don't require a credit check–they know they'll be approved. Our hope is, even though we have been doing little loans all along, because this one doesn't require a credit check, hopefully it will attract some of those people," Spencer said.

FCFCU's Express Pay features a fixed APR of 15 percent, with terms of 30 days. Payment due dates are based on the member's payroll cycle, and if the member is unable to pay within 30 days, the loan may be renewed.

Spencer said the product was introduced so recently, it's too early to know how many members have taken the credit union up on the deal. However, the VP said she knows the need is there among her membership.

"I know a lot of credit unions are struggling with what they can offer, especially those close to a military base, because you know you have members who are being pulled into the cycle, and you hate to see that," Spencer said.

Auto title lending seems to be more popular on the East Coast than in the west, according to Brad Smith, vice president of Strategic Development for Pacific Marine Credit Union. The $462 million PMCU is headquartered on Camp Pendleton marine base, near Oceanside, California.

"We don't see much title lending around here. It's something that seems to be more popular on the East Coast. We haven't really addressed it, because it hasn't presented itself as a huge problem here," Smith said. –[email protected]