This article breaks down the different lending regulations currently on the books in Texas. The state has established these laws to assist 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 of borrowing can be quite high. Car title loans are short-term loans where a lender uses your vehicle as a 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 title loan once 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 title loan requirements are somewhat looser in Texas than in most states. However, there are certain forms of regulation that are meant to protect consumers.
In the state of Texas, at the moment there is no cap on title loan amounts, even though there is 10% interest rate cap. Also, there is no fee limit. Keep in mind, while there are no state specific caps, 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.
However, there is an exception when it comes to Texas’ 10% interest rate cap that title loan 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. That way, 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 Texas 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. Basically, 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. This is done by using a company that acts as a credit services organization. It seems there may be some changes to these regulations in 2019. There are a few payday loan and installment loan changes that may be coming due and these would affect vehicle equity lenders as well. Check back when the legislative calendar kicks off as we should see an update to this loophole.
If you, as a title loan consumer, appear to be 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 Court for repossession or provide any warning about it. 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 to for a local company that provides retail Texas title loan services and online access as well.
Most of us know about the widely 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, in Dallas, in 2011 the officials 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, from 2016 there is a new regulation that obliges 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 in Texas that apply to many larger cities. For instance, in Dallas, Austin, San Antonio, Houston, 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 proves to be 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 Texas title loan lenders. Many of these rules also apply to payday loan and cash advance companies. That means that most payday advance rules you comes across may apply to your local vehicle equity 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.