If you’re reading this article it’s likely you’re at least considering some type of short term loan from a Texas lender. While most short term loans are regulated by the state, there’s a bit more that goes into regulations that govern car title loans. Therefore, it’s important that you understand the Texas Title Loan Regulations covered by the Texas Fair Lending Act.

Besides state and federal regulations, each city may have additional regulations that govern these loans. As an example, Dallas has citywide ordinances in place that effectively limit the amount of money anyone can borrow by using their pink slip as collateral.

Before you decide if you choose to get an auto title loan, check with your city to see if they have added codes and regulations to those of the state.

Overview of Title Loan Regulations in Texas

Before you sign off on a Texas title loan, each company is required to go over the costs of your loan. This includes a complete explanation of the fees and added costs that will be added to your loan. Installment and payday loans operate under the same format. These lenders will also need to break down the finance costs and other possible charges. They must also explain in simple language what your rights are as a consumer. As an example, you have the right to get your vehicle back if it gets repossessed. Any company you work with should supply you with documentation that spells out exactly what you need to do if this happens. They will specify who you need to contact in case you need to file a complaint. This includes the name, address and phone number of the agency.

Each time you take out a new loan or extend the current loan, the lender is required to explain every detail of the contract. The lender will detail your rights to you again as well as provide you with a copy of the new contract after it is signed. It’s a big red flag if a lender doesn’t want to do this. Most reputable companies will have no problem discussing what happens if you default or run into issues making payments on your loan.

Every contract must include the exact payment terms. This includes the total number of payments and the total amount of interest. The contract should break this down for the duration 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 car title loan. It will qualify as long as it’s determined to be a high dollar short term loan. It should also include a clear statement that if you pay the loan off early, you will not be charged a penalty. In the past, some unscrupulous lenders have used threat of bringing a criminal charge against a customer. They would do this if a customer missed a payment or if a check or debit payment bounced. The lender, in such cases, can repossess your vehicle since the loan is outstanding and the method of payment was faulty.  At this point, most borrowers work with a local company.  But it’s important to point out that these rules also apply to companies who provide online title loans in Texas.  As you probably know by now, they can’t arrest you or send the local sheriff to your door. Run from any company that threatens you with that.

You do have an option to prevent a repossession the first time – and only the first time – in the case of a bounced check or debit payment.

It requires three steps.

1. You must call the lender and inform him that there has been an error in your bank account and that your payment may not go through.
2. You must email the lender with the same information.
3. You must send a letter, “return receipt requested” 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 will inform them of the situation and who you spoke to. It will also include your first and last name as well as the date and time of your call to them. This letter must be postmarked on the same day that you spoke to the representative at the title loan company’s office.

Once those three steps are taken, the lender must allow you to make reasonable arrangements to make up the payment.

Your Obligation to Choose a Reputable Texas Lender

Every Texas car title loan business – whether offering store front financing or online title loans– is required to post a copy of their current license in a location easily seen.  If they are an online lender, the license must be displayed in a prominent place on each page of the lender’s website. This also applies to companies that specialize in providing payday loans and cash advances. In terms of Texas regulates there is no distinction between an online lender or retail cash advance company. It’s up to you to make sure that the license is current and that the lender has not been suspended or revoked.  As we mentioned above, do all you can to understand your citywide regulations and rules that cover short term lenders.  We recently touched on this subject with an article about statewide regulations and specific city ordinances in Texas.  Use this information at your discretion.  The laws and ordinances are always changing so check with your local Government for the most up to date information.