Title loans are nasty little beasts that can keep you in deep debt for months or even years, depending on the interest rate and how many times a title lender will allow you to roll over the principal amount of a loan and pay just the interest that’s accrued in the past 30 days.
Title loans are small dollar, short-term loans that are secured by the original, lien-free title to your car. If you default on a title loan, the lender will repossess your car and sell it to cover the outstanding balance of the loan plus any costs incurred for repossession, storage, and the sale of the vehicle. In some states, the lender doesn’t have to give you any of the surplus proceeds from the sale once the outstanding loan and fees associated with repossession are paid.
Title loans are illegal in 30 states because they’re predatory lending at its worst, and more often than not, they result in some measure of financial ruin for those who take them out. A few of the 20 states in which these loans are legal have imposed certain regulations on title loans to prevent them from causing undue hardship for borrowers. Florida is one such state. Title loans in Florida are governed under the Florida Title Loan Act.
Capping Interest Rates
Several organizations, including the Center for Responsible Lending and the Consumer Federation of America, have spent years pushing for stricter legislation regarding title loan interest rates, which are out of control in states where they’re not governed.
Interest rates for title loans can climb as high as 560 percent a year or more, although the typical title loan interest rate is 300 percent a year, or 25 percent a month. This means that a $1,000 title loan that’s paid back in full after 30 days will cost $1,250. The typical title loan borrower rolls over the principal of a title loan eight times, paying only the $250 interest each month. At the end of the eighth month, that $1,000 loan will have cost a total of $3,000.
Florida is one of the few states that has imposed a rate cap on title loans to keep the monsters in check. The maximum interest rate for a title loan in Florida is 30 percent APR for the first $2,000, 24 percent APR for loans between $2,000 and $3,000, and 18 percent APR for loans exceeding $3,000.
If a lender purposely charges a higher interest rate, they have to refund the excess interest paid, return the car, and forfeit the principal amount of the loan.
Reining In the Repo Man
In some states, a title lender can swoop in and repossess your vehicle without warning just a day after you default on the loan. In Florida, however, the lender has to wait 30 days after the due date to repossess the car. They also have to notify you that repossession is imminent and give you an opportunity to turn the car over to them at a convenient location and time. Either way, before they take possession of your vehicle, they have to give you a chance to get all of your personal belongings out of the car.
At least 10 days before the lender sells your car, they have to send you a written notification of the date, time, and place in which the sale will take place. The notification must include the amount of money you owe on the loan, the amount of interest that accrued before the lender repossessed your car, and an itemized list of reasonable expenses associated with repossessing, storing, and selling your car. If your’e able to come up with the money due before the car sells, the lender has to give you the car back.
If you can’t pay the amount that’s due, the lender can’t stop you from buying back your own car at auction, and once the car is sold, the lender can’t come after you for any amount that the proceeds of the sale of the car didn’t cover.
Within 30 days of the sale of your car, the lender has to send you all of the surplus from the sale of your car, minus what you owed on the loan and the expenses incurred as the result of repossession. If you have to take the lender to court in order to get the surplus money back, you’re entitled to the attorney’s fees and other costs associated with the legal action, as long as it results in the court ordering the lender to fork over your dough.
The fact that this last measure had to be written into the law shows just how unscrupulous title lenders can be. Since they’re largely unregulated in many states – including some states in which title loans are purportedly illegal – too many title lenders conduct their business as though they’re above the law.
Partial Payments and Early Repayment
In some states, title lenders can refuse to accept partial payment toward the principal of the loan, and they can charge you a penalty for paying off the title loan early. Not so in Florida. Florida law requires that title lenders accept partial payments and forbids them from charging a penalty if you pay off the loan before the term is up.
What to Do If You Suspect You’re the Victim of a Rogue Title Lender
If you believe a Florida title lender isn’t following the law, get legal counsel through an attorney’s office or through a consumer advocacy organization. If you suspect a lender isn’t being up front with you about any aspect of the loan, or if they try to tell you that they’re somehow exempt from certain parts of the law, don’t believe it! Double check with an attorney before giving up the fight. Legal action is the only way to keep some title lenders honest.
How to Protect Yourself: Title Loans
There are two Florida laws regulating vehicle-secured finance loans.
Under Chapter 537, Florida Statutes, the Florida Title Loan Act requires title loan lenders to be licensed by the state Office of Financial Regulation. Under the law, in order to receive a loan, you and the lender must sign a written agreement before you get your loan. Be sure to read and understand the agreement before you sign. It must specify how much you are borrowing (called the “amount financed”) and what the interest rate will be. You may verify a title loan lender’s license with the Florida Office of Financial Regulation online at www.flofr.com or by phone at (850) 487-9687.
The loan agreement must also explain that if you do not repay the loan the lender can take possession of your vehicle, sell it, and keep the proceeds up to the amount you owe along with any reasonable expenses to cover the repossession and sale. Also, the lender must notify you if the lender intends to repossess your vehicle and you will have the chance to arrange to hand it over instead of having a repossession agent come to get it. You must have a chance to remove any personal property you have in the vehicle. Additionally, up until the time the car is sold, you still can get it back if you pay back your loan and any reasonable expenses. The lender has to tell you 10 days in advance of the time and place of the sale and give you an accounting of what is owed.
Chapter 516 does not contain all of the protections offered in Chapter 537. The lender is required to give you a written statement of the amount borrowed and the interest rate. However, repossession procedures, sale procedures, and what lenders can charge as added fees are not as specific as in Chapter 537. If you decide to take out a finance loan from a lender, you should ask the lender what its policies are on notifying you in advance of a repossession or a sale and on whether you might be able to get your car back before it is sold and for what charges.
Remember that a title loan is not risky for the lender but it may be very risky for you.
Get Your Driving Record By Name & Address
- OR -
Get Your Driving Record By License Plate #