CAR TITLE LOAN
REGULATIONS IN TEXAS

A car title loan lets you borrow against the value of a vehicle you own outright (the vehicle must be titled and registered in your name). A lender is added as a lienholder to your car's title as collateral until the loan is repaid in full. These loans skip the traditional bank approval process and often don't require a full credit check. Because of the minimal underwriting, they carry significant risk if you can't keep up with payments. There are more title loan regulations in Texas than people realize. Knowing what your lender is actually required to do and what they're prohibited from doing can save you time and money.

Companies that offer car title loans and other short-term loans in Texas must comply with state licensing and consumer protection laws. Title loan companies in Texas operate as Credit Access Businesses (CABs), which are regulated by the Texas Office of Consumer Credit Commissioner (OCCC). These businesses often arrange or broker loans and must comply with specific state laws and regulations. To operate legally within Texas, these companies must be registered as a Credit Services Organization (CSO) with the Secretary of State and licensed as a Credit Access Business with the OCCC. With this dual licensing, lenders meet both consumer protection and state financial requirements.

Because title loans are structured as Credit Access Businesses in Texas, state lending regulations differ from those for traditional unsecured bank loans. The regulatory framework for title loans in Texas is complicated, as both the city and the state have a role in how these loans operate.

In addition to state regulations, most major cities in Texas have enacted a Unified Ordinance that caps title loan amounts. In these locations, a title loan cannot exceed the lesser of 3% of a customer's gross annual income or 70% of the vehicle's retail value. For example, Houston has citywide ordinances that limit loan amounts and monthly payments for title loans. Lenders operating in Houston must hold a state CAB license, register annually with the city, and adhere to additional restrictions on loan renewals and contract language.

Lending Laws For Texas Title Loan Companies

When looking for a title loan, don't go with the first lender you find. The fees and repayment terms for title loans vary widely between companies, so shopping around for even 30 minutes can significantly change the amount you pay. Pay particular attention to the origination fees and any charges buried in the fine print. Licensed lenders in Texas must disclose the finance costs and other possible charges and explain your rights as a consumer in plain language. Per Texas Business & Commerce Code § 9.608, a lender must pay the borrower any "surplus" funds remaining after the debt and reasonable repossession costs are accounted for.

Your lender is also required to provide you with written documentation covering the repossession process, including what triggers it, how the vehicle is auctioned, and what happens to any money left over after the debt is settled. Under § 9.609 of the same code, a repo agent can't force their way in, make threats, or take your car from a locked garage. If they cross that line, you may have legal recourse against them.

When you take out a new title loan or renew an existing one, your lender must detail the terms in your contract and specify the fees if you default on the monthly payments. In cities that have adopted the Texas Unified Ordinance, including Austin, Dallas, Houston, and San Antonio, a title loan can be renewed no more than 3 times.

Furthermore, every renewal or installment payment must reduce the loan principal by at least 25%. Because of this requirement, a title loan governed by the Unified Ordinance will be fully paid off within four payment cycles.

APR And Interest Rate Restrictions on Title Loans in Texas

Every contract must include the complete repayment terms, including the total number of payments, the total amount of interest, and the total amount paid over the life of the loan. While Texas does not set a traditional interest rate cap for CABs, title loans in Texas typically carry interest rates of 100-300%. The total cost of the loan must be shown and disclosed as an Annual Percentage Rate (APR) so you can compare the true cost versus other lending options.

If you pay off your title loan early, Texas law generally does not allow lenders to charge a prepayment penalty. In the past, some predatory lenders have threatened to bring criminal charges against customers who miss a payment. Contrary to those illegal scare tactics, a lender cannot have you arrested or send the local sheriff to your door for a civil debt. Specifically, the Texas Debt Collection Act (Texas Finance Code § 392.301) prohibits lenders from threatening prosecution or arrest for nonpayment. Borrowers targeted by these tactics can file a complaint with the OCCC or pursue civil litigation.

If your payment is returned due to insufficient funds, a bank error, or if you simply can't afford the payment, you may still prevent repossession by contacting your lender. Repossession costs the lender money, too, including towing, storage fees, and auction fees. In most cases, they would rather work out a payment arrangement than go through the hassle of a repossession. If you know you're going to miss a payment, take the following steps:

1. Contact your lender immediately by phone to explain your situation, and let them know the payment won't go through.
2. Follow up in writing via mail or email, with the same information and any proposed payment arrangement.
3. Send a “return receipt requested” letter to the lender indicated on your contract. Keep in mind, the lender on your contract may be different from the local storefront location where you got the loan.

Choose A Title Loan Company in Texas That Follows Local Regulations

Each licensed title loan location in Texas is required to display its OCCC license on-site. Because every physical location must hold its own separate CAB license, a company operating multiple storefronts needs a license posted at each one. Online lenders operating in Texas can satisfy the license display requirements by making their OCCC license available on their website.

Before you hand over your title, take five minutes to verify the lender's OCCC license is active. It's public record and takes no time to check.  This matters especially if you're working with an online lender. A lender operating in Houston is still subject to Houston's municipal ordinances, regardless of whether the transaction occurs in a storefront or online. While title loans are allowed in all cities in Texas, some cities and local jurisdictions have specific laws that regulate the amount you can borrow and what happens if a lender repossesses your vehicle.

Have questions or ready to get started? Call us at 844-243-3195, and we'll walk you through your options.