It’s always a good idea to understand how a loan works, and the laws regarding the type of loan you’re getting, before you apply for it. And if you get a title loan in Texas, fully understanding the regulations on that type of loan may save you quite a bit of money. Many consumers mistakenly believe that there’s no way a lender would make a mistake, failing to realize that they’ve been over charged for a title loan.
When you have a title loan to pay off, you should make sure that you read both your contract with the title loan company and the laws regarding title loans, federally and in your state. Here’s what you need to know to ensure that you don't over pay for title loans in Texas.
Interest Rate Limits for Title Loans in Texas
The federal government hasn’t put any interest rate limits on title loans, which means title loan companies often charge interest much higher than your typical lender would. However, each state sets its own limit on title loan interest rates.
Some states decide not to put a limit in place, but that isn’t true in Texas, which limits title loan interest rates to 10 percent. If a title loan company has charged you a higher interest rate than that, you may have been over charged for a title loan. There is a way for title loan companies to effectively charge more interest, though, so don’t get too excited yet.
Title Loan Companies in Texas Operate as Credit Access Bureaus
Considering title loan companies don’t run credit checks and often issue loans to high-risk borrowers that other lenders would avoid, 10 percent isn’t much to charge in interest. That’s why title loan companies in Texas use an alternative method to charge more.
What they do is register with the state as Credit Access Bureaus. There is a Credit Services Organization Act of Texas that allows this, and it essentially means that the Credit Access Bureau facilitates a loan between two parties, the borrower and an independent lender.
Here’s how the process would work – you’re looking for a title loan, and you go to the office of a title loan company, which also operates as a Credit Access Bureau. This company sets up your loan with a third-party lender, and that lender charges you a maximum interest rate of 10 percent. The Credit Access Bureau can charge you as much as it wants in fees, because the title loan regulations in Texas don’t cover those. It’s common for those who take out title loans in Texas to pay over 20 percent in interest per month.
Wondering how to get out of a title loan? There are a couple steps you should take to make sure that the lender did everything correctly.
1. Verify the Lender’s Licensing
It’s unlikely that you’ll get out of a title loan because the lender wasn’t licensed. Most title loan companies make sure to get the proper licensing to avoid any issues. Still, it’s worth checking to verify, because House Bill 2594 requires all title loan companies to register with the state.
2. Check if You Were Given the Right Disclosures
This is important – Texas state law requires both title loan companies and Credit Access Bureaus to give each borrower a full disclosure with information on their loan. This disclosure must have a few key pieces of information, which includes:
• The interest rate of the loan
• The fees on the loan
• The annual percentage rate (APR) of the loan
• A comparison between the loan and other loan options currently on the market
• How much it would cost in fees to extend the loan
If your lender did not provide you with this information, then they failed to fulfill their legal requirements, which would void your agreement.
3. Check the Interest Rate on Your Loan
As mentioned, title loan companies can’t charge more than 10 percent for a title loan in Texas. They charge more in fees to get around that, but if your lender decided to cut corners, they may have charged you an interest rate higher than the state limit. If you were over charged for a title loan, the lender is breaking the law, which would also void your agreement.
An Out for Members of the Military
If you’re in the military, it’s illegal for a title loan company in Texas to issue you a loan. Title loan companies will typically ask borrowers about this beforehand to avoid lending to the military, but if yours did not, you could get out of that title loan.
What Should You Do If You Were Over Charged for a Title Loan?
Let’s say that you’ve determined your lender did something wrong during the loan process. Maybe they over charged you by going over that 10 percent interest rate limit, or perhaps they didn’t give you the legally required disclosure forms.
This is great news for you, but you still need to take the right steps to take advantage. Knowing your rights is one thing. Making sure they’re respected is another.
Whether you’ve just gotten your title loan and have a few weeks until your payment due date or you’re on the brink of a Texas title loan repossession, the first thing you should do when you notice an issue is contacting your lender. Explain to them that you discovered that your title loan contract doesn’t follow state law.
If you’re fortunate, the lender will at least offer to refund you of any fees. It’s also possible that the lender fights you on it and expects you to pay up anyway.
The lender may not think you’re prepared to press the issue. If that’s the case, you’ll need to prove that you will. You could explain to the lender that you’ll go to local media, politicians or even hire a lawyer to settle the matter in court.
As a disgruntled customer, there’s only so much you can do alone. But if you get the media involved or find a lawyer to take your case, then it creates bad publicity for the title loan company and becomes a much more serious issue. And if the lender over charged you, it’s likely that they’ve also over charged other borrowers. They won’t just end up needing to refund you of your fees, they could end up refunding hundreds or thousands of customers if word gets out.
Getting Your Money Back for a Title Loan
If a title loan company over charged you, then you deserve to get a refund, and if you play your cards right, you’ll get one. It may not be easy, but it’s worth your time.
It is smart to figure out how much you want before you start discussing the issue with the lender. Maybe you’re just looking for a refund of your fees and interest, or you could want them to refund the entire loan. The former will be much easier to get than the latter.
Getting Title Loan Buyout Help
Title loans are a great option for when people need to come up with a little extra funds. It can be perfect for emergency situations or for getting caught up on an essential bill that needs to be paid. While they are good for a quick solution, some people may find they need help getting their title loans bought out. It can be easy to get a title loan without vehicle inspection. It can also be easy to get title loan buyout help. Below are a few benefits of trying a buyout program with a lender.
When you get your title loan bought out by another lender, you will usually see your loan amount go down in interest. This can save you a lot of money. Companies that offer buyout options are typically very affordable and competitive.
Getting your car title loan bought out by a lender can help to reduce your overall stress and let you get caught up on your payments. Refinancing through another lender is the best way to ensure you don't fall so behind that your current lender starts the repossession process on your vehicle. You will be able to get a lower interest rate and lower monthly payments that you can afford.