This article breaks down recent changes to lending regulations on the books in Texas. The state has established these laws to help both the borrower and lender. We pride ourselves on providing accurate and up to date information, but this is not legal advice. Please consult an attorney or contact the proper authorities for more information. Vehicle equity loans fall under the so-called “small-dollar” statute in Texas. That means you can use them when you’re short on money for your rent, car payments, or other bills. These high interest loans should only be used for emergency purposes. While there are interest rate and fee caps, the cost to borrow is high and most companies will require access to your bank account through a direct deposit loan. Car title loans are short-term loans where a lender uses your vehicle as collateral. We say short-term loan, as the loan term is generally four weeks. Also, you can keep driving your car during that period, provided you’re making your regular payments.
What’s more, it’s possible to roll over your loan into a new online title loan. Consider this when the time comes for your term to end and you need more time to pay. When it comes to Texas laws, you should know that online financing requirements are somewhat looser in Texas compared to most states. There are certain forms of regulation that are meant to protect consumers. But it pays to stay on top of recent changes to state statutes and requirements. As this article covers updates and changes, Be sure to check out our main page that covers Title Loan Laws In Texas.
At the moment there is no cap on online title loan amounts, even though there is a 10% interest rate cap. Also, there is no fee limit and no changes to what occurs if your vehicle gets repossessed because of late title loan payments. While there are no state caps or limits in Texas, there are some cities that have implemented regulations. We’re not going to list them all here, but cities like Dallas and Austin have municipal codes which attempt to regulate online title loans.
We know of one exception when it comes to the 10% interest rate cap that lenders tend to use. Car title loan providers can register under the Credit Services Organization as a Credit Access Business. By doing this they can negotiate between a borrower and a 3rd party lender. They can charge fees for arranging the loan, while the 3rd party lender keeps charging their interest rate at 10% or less. Since CAB fees don’t fall under the payday loan or title loan laws, they have no caps. There is one area where title loan laws in Texas limit the borrowers – the term. Your credit service contract cannot exceed the period of 180 days. That way, you can renew the 30-day original title loan five times before you can’t renew anymore and your loan is due in full.
There is a law in Texas stating that title loan lenders must have a license and must respect regulations. The purpose of this law is to limit, if not to completely close, a loophole that allows CABs to avoid licensing and regulations. This also applies to local lenders who provide funding through third-party firms. At this point, a company acts as a credit services organization. It seems there may be some changes to these regulations in 2021. There are a few payday lending and installment loan changes that may be coming due and these would affect vehicle equity lenders as well. Check back when over the upcoming months as we should see an update to this loophole.
If you, as an online title loan consumer are late on your loan, lenders can repossess your vehicle. The repossession may take place one week after the due date you missed. The lender is not required to go through a local court for repossession or offer any warning about it. For example, let’s say you took out a title loan from an Austin, Texas lender. That company has the right to repossess the vehicle when falling behind! It’s best you prevent this scenario from happening. Not only will you end up being without your car, but you’ll also have to pay extra repossession fees. In general, lenders will work with you if you fall behind on your payment. That way, you can renew your loan and catch up with your payments. Look for a local company that provides access to an online application.
Most of us know about the published regulations in place from the State Government in Austin. Yet, there are certain laws that apply to some towns and cities, while not being applicable to others. For instance, state officials recently passed two restrictions on payday loans. With these restrictions, they wanted to restrict short-term lenders from operating in some areas. Besides that, they limited the amount that you can borrow from a lender. Also, in Killeen, there is a new regulation that obliges title lenders to make sure you don’t borrow an amount that exceeds 20% of your monthly income. Finally, there are regulations for online title loans that apply to many larger cities. For instance, in larger metropolitan areas like Longview, Dallas, and Austin, there is a limit of 70% of the current market value of your vehicle. There’s also a limit of 3% of your annual income (whichever is lower). You can find more information about the regulations in the City of Austin by checking out their local ordinances site.
These are only a small percentage of the individual city and county-wide ordinances that pertain to car title loan companies. Many of these rules also apply to payday loan and cash advance companies that operate in those areas. That means that most payday advance rules you come across may apply to your local car title lender as well. It can all be confusing, so be sure to do your homework and consult an attorney or expert for more detailed information.