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Car title loans are regulated by a combination of federal and state laws. Title loans serviced by LoanMart follow all applicable laws, while providing competitive interest rates to customers who are looking for a way to access cash using the equity in their vehicle.
Understanding Title Loan Regulations in the United States
State Laws Regulations That Apply To Title Loans
In the United States, auto title loans are widely available in several states, but not in all states. For example, borrowers in Arizona, Kansas, Texas and Utah can usually choose from a wide variety of lenders, even if their car it not yet paid off. Residents of New York on the other hand may not be able to access title loan options at all.
The reason for that is that states can regulate certain aspects of consumer lending, which can include title loans specifically, or loans that meet certain criteria such as loan amounts or interest rates. For example, some states might set legal limits for the interest rates and fees that lenders can charge under the applicable state laws, set limits for the minimum and maximum loan amount, or loan repayment periods.
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In addition, states may impose licensing or registration requirements, which can include specific title loan lending licenses, or more broadly, consumer lending licenses or loan broker and collection licenses. Lenders and loan servicers that obtain the required licenses are typically subject to audits by the respective state regulators, and may also have periodic reporting obligations.
Besides having a say over how loans are made and what licenses are required, state laws and regulations can also impact when and how a title lender or servicer can repossess and sell a vehicle. State laws concerning vehicle recovery usually cover items like notice requirements and a borrowerâs right to cure a default, i.e. catch up on past-due payments.
Federal Laws and Regulations
In addition to state laws and regulations, there are several federal laws that apply to consumer lending across the entire United States. These laws are in place to ensure lending is transparent and consumers are protected from unfair or deceptive practices. The main laws in this category include:
- The Truth in Lending Act (TILA): the TILA is intended to ensure transparency when loans are made, and to protect borrowers from unfair billing practices.
- The Equal Credit Opportunity Act (ECOA): the ECOA prohibits discrimination of borrowers based on certain characteristics, known as âprotected classesâ, for example race, color or age.
- Servicemembers Civil Relief Act (SCRA): the SCRA provides special lending protections for borrowers during military service.
Do Laws and Regulations Make Title Loans Safe?
When it comes to borrowing money, thinking about risks is important, both from the borrowerâs perspective and the lenderâs perspective. While title loan lenders will primarily be concerned with a borrowerâs risk of default, an applicant for a title loan may wonder if the loan is a safe borrowing option.
The consumer protections that come with the laws and regulations applicable to title loans make this borrowing option a safer choice than it would be without them. Legal guardrails for how loan terms are disclosed, how loans are made, and what title loan collection practices are acceptable help to keep borrowers safe from unfair lending practices. From a borrowerâs perspective, the primary risk that comes with using a title loan is that the vehicle is used as collateral. As with any secured loan like a mortgage or vehicle-purchase loan, the risk to the collateral is not eliminated by those regulations.
Final Thoughts About Title Loan Regulations
Auto title loans are regulated by multiple levels of government â both state and federal. Before applying for a car title loan, itâs a good idea to research the laws that would apply for borrowers in your state, and to have a good understanding of the federal laws that are in place to protect title loan borrowers.
LoanMart offers car title loans that follow all applicable laws and come with competitive interest rates. You wonât have to worry about balloon payments, prepayment penalties or hidden fees that you may experience if you choose to apply with lenders who donât comply with applicable laws.
If you own a car with a free or clear title and a vehicle title loan sounds like a good option, get a title loan quote in minutes to see what your car qualifies for!1
