Consumer Credit Regulation: 12.2.4.50 West Virginia
West Virginia does not have an auto title lending statute and its pawn statute does not reference auto title loans. For applicable state regulation, see Appendix D, infra.
West Virginia does not have an auto title lending statute and its pawn statute does not reference auto title loans. For applicable state regulation, see Appendix D, infra.
Auto title lending is authorized in Wisconsin.203 While the law does not impose any restrictions on the interest rate that lenders may charge to borrowers prior to the maturity date of the loan,204 lenders are limited to charging 2.75% per month or (33% a year) on loans that are not paid in full by the maturity date.205 The law does not allow a lender to repossess a vehicle without sending the borrower notice twenty days prior to taking possession
Wyoming does not have an auto title lending statute and its pawn statute does not reference auto title loans. For applicable state regulation, see Appendix D, infra.
Auto title lending is also typically subject to a state’s other laws of more general applicability, such as unconscionability, fraud, misrepresentation, and unfair and/or deceptive practices.207 Some state lending laws prohibit unconscionability, or a UDAP statute applicable to lending may contain such a provision.208
If state law where the consumer resides prohibits high-interest auto title loans, auto title lenders may use various schemes to instead fall under some other jurisdiction’s law regulating auto title lending. One way to do this is to set up shop just over a state’s border in a neighboring state with a high usury limit.
In at least Texas, explicit legislation allows auto title lenders to evade the state’s regulation of auto title lenders by claiming to be loan brokers who receive a fee for arranging a third-party auto title loan for the consumer.220 In other states, it is a matter of court interpretation whether the lender is truly a broker arranging a third-party loan or whether it is really arranging a loan for itself.
Auto title lenders may seek to avoid auto title loan or small loan legislation by claiming that the transaction is not a loan at all, but instead that the consumer has sold the vehicle to the auto title company and that the company is leasing the car back to the consumer.227 Evidence that this is a fictitious evasion is apparent where the auto title lender in fact advertises that you pawn your title but keep your car or somewhat more ambiguously “quick cash 4 your car/keep to drive.”
Some states have one usury cap for small loans and another much higher cap or no cap at all for open-end credit. In addition, Truth in Lending Act disclosures for open-end credit are much less informative than disclosures for closed-end credit.236
An auto title lender may attempt to get around a usury cap by combining the loan with an overpriced service that the lender claims is not interest and should not be included in the calculation of the interest rate.
The Consumer Financial Protection Bureau (CFPB) enacted a final rule covering auto title, payday, and similar loans. The rule required lenders to engage in an ability-to-repay analysis and also limited the use of preauthorized payments.248 While the rule was enacted, the CFPB later rescinded most of the rule before it went into effect.
The Military Lending Act (MLA) effectively bans auto title lending extended to servicemembers and their dependents. The Act’s coverage as to consumers and consumer credit and consumer remedies for violations is examined at § 2.2.5, supra.
The Truth in Lending Act applies to auto title lending and requires disclosure of the annual percentage rate (APR) and finance charge. Rules are established as to when a fee must be included in the finance charge and APR. Violations lead to statutory and actual damages and attorney fees. The Truth in Lending Act is discussed in Chapter 2, supra and in far more detail in NCLC’s Truth in Lending.
While the federal RICO statute and the Fair Debt Collection Practices Act (FDCPA) do not regulate allowable interest rates or fees for auto title lending, they do provide strong consumer remedies for auto title loans that exceed state interest caps.
Consumer Credit Regulation is available in both a print and digital version. Print revisions are released every few years and the digital version is updated more frequently, with all changes integrated into the text. The digital version also contains additional pleadings, practice tools, and primary source material, described at § 1.1.5, infra.
This treatise examines federal and state restrictions on consumer credit transactions, and federal preemption of the state restrictions. It focuses on interest rates, fees, third-party charges, rebates of unearned interest, late charges and other credit terms for non-mortgage credit. Other NCLC treatises detail limits on creditor remedies where a consumer defaults on a credit obligation—debt collection, collection lawsuits, repossessions, credit reporting, and garnishment. This treatise focuses on the origination of non-mortgage credit obligations and their terms.
There is a widespread belief that regulation of consumer credit is minimal—that federal law offers few protections, that state limits have been deregulated, and that those state limits that do exist can be avoided through federal preemption, rate exportation, or other means. The true picture today is far more complex.
Consumer Credit Regulation’s chapters are divided into two parts. Part I (Chapters 1–7) includes topics of general application to the regulation of consumer credit.
The digital version of the treatise also includes pleadings and discovery, practice tools, and primary sources, that can easily be downloaded, emailed, and cut and pasted into documents. They are listed at the bottom of the table of contents found in the left pane and are fully searchable. Search filters allow users to search only for pleadings, only for primary sources, or only for practice tools. Searching for pleadings is recommended using the Advanced Pleadings Search tool, found above the Search box.
In response to the problem of low minimum payments, the Credit CARD Act added a requirement that lenders disclose the actual number of months that it will take to pay off the balance on an account if the consumer makes only the minimum payment.482 Lenders are required to provide the following warning in periodic statements using the exact language below:483
Some credit card lenders have engaged in questionable marketing practices when soliciting consumers. “Bait and switch” tactics had been common before the Credit CARD Act. For example, some credit card lenders marketed “no annual fee” credit cards, then imposed an annual fee six months later using a change-in-terms notice.492 They heavily advertised low “fixed” rates, but subsequently raised rates through change-in-terms notices and penalty pricing.493
During the past few decades, there has been a massive increase in credit card debt, as described in § 8.1.2.3, supra. The credit card industry bears a significant portion of the responsibility for this phenomenon. Credit card lenders aggressively solicited consumers at the beginning of this century.
The Credit CARD Act, for the first time, imposed underwriting requirements on credit card lenders.
Even with the scope of federal preemption, there is still room to bring state law claims against credit card lenders. If an abusive practice is outside of the scope of the Credit CARD Act or violates a provision without a private remedy, practitioners may want to consider claims for breach of contract or the duty of good faith and fair dealing, or under state laws prohibiting unfair or deceptive acts or practices (UDAP statutes).
A breach-of-contract claim is probably one of the first theories that comes to mind when analyzing an abusive credit card practice for legal violations.729 Obtaining and understanding the underlying contract, however, may not be as easy as it sounds—and not just because the contractual language is obscure. Many consumers do not keep their credit card contracts.