Car Title Loan Laws in Texas For 2023
Most financing companies that offer short term loans and secured loans are licensed by the State of Texas. But a bit more goes into regulations that govern online title loan companies in Texas. Therefore, you need to understand Funding Regulations and how they affect residents in our state. The Texas Office of Consumer Credit Commissioner covers many of these updates. Also, stay on top of recent changes to State Statutes with the Texas Department of Savings and Mortgage Lenders. Take note some regulations can overlap between different state entities.
Besides state and federal regulations, each city may have rules for companies that offer title loans in TX. For example, Dallas has various citywide ordinances restricting the amount you can borrow. Some laws limit the amount of money anyone can borrow by using their pink slip as collateral. Before getting a vehicle equity loan, check with your city to see if they have additional codes and regulations.
Lending Laws For Texas Title Loan Companies
Before you sign off on a title loan, each company must review your loan’s costs. This includes a complete explanation of the fees and expenses added to your loan. Installment and payday loans operate under the same format. These lenders must also break down the finance costs and other possible charges. They must also explain your rights as a consumer in simple language. For example, you can get your vehicle back after it’s repossessed. Any lender must supply documentation detailing what you can do if they take your car.
When you take out a new secured loan or extend the current one, the lender must explain every contract detail. After signing, the lender will detail your rights to you again and provide you with a copy of the new contract. It’s a big red flag if a lender doesn’t want to do this. Most reputable Texas title loan companies will have no problem discussing what happens if you default or run into issues making payments on your loan.
APR And Interest Rate Restrictions on Title Loans in Texas
Every contract must include the exact payment terms. This consists of the total number of payments and the total amount of interest. The contract should break this down for the life of the loan. It’s worth noting that it doesn’t matter which type of short term loan this applies to. It can be a payday loan or a car title loan. It will qualify if it’s determined to be a high dollar amount.
If you pay a title loan early, you won’t be charged a penalty. In the past, some unscrupulous lenders have used the threat of bringing a criminal charge against a customer. They would do this if a customer missed a payment or defaulted. In such cases, the lender can repossess your vehicle since the loan is outstanding and the payment method was faulty. As you probably know, they can’t arrest you or send the local sheriff to your door. Run from any company that threatens you with that, as they likely have no regard for other consumer protections.
You can prevent your vehicle from being repossessed in the case of a bounced check or debit payment. It requires three steps.
- You must call the lender and tell them there’s been an error in your bank account, and the payment won’t go through.
- You must email the lender with the same information.
- You must send a “return receipt requested” letter to the lender indicated on your contract. Take note the lender may or may not be the local office where you got the loan. This letter must be postmarked on the day you speak to the title loan company’s representative.
Once those three steps are taken, the lender must allow you to make reasonable arrangements to make up the payment.
Choose A Title Loan Company in Texas That Follows Local Regulations
Every financing business needs to post a copy of its current license in a location that can easily be seen. It doesn’t matter if it offers store-front financing or online title loans. Online lenders in Texas must display a permit in a prominent place on each page of the lender’s website. This also applies to companies that provide payday loans and cash advances. Texas regulates there is no distinction between an online lender and a retail cash advance company.
You must ensure your lender’s license is current and that they are legally allowed to offer loans within the state. As mentioned above, do all you can to understand your citywide regulations and rules covering online title loan companies. We discussed this in an article about statewide regulations and city ordinances in many of the largest metro areas of Texas.
