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Consumer Credit Regulation: 12.2.4.43 South Dakota

In South Dakota, auto title lending is authorized by statute.179 The law did not contain any interest rate cap until 2016, when the voters approved an initiative that sets a 36% cap, including all ancillary charges, on non-bank loans, including auto title loans.

Consumer Credit Regulation: 12.2.4.45 Texas

In Texas, auto title lending is authorized by statute.192 Interest rates on auto title loans are not capped and lenders are permitted to charge any fees for their services as agreed to between the parties.193 Lenders are merely required to disclose to the borrower the interest, fees, and APR that will be charged in the transaction, as well as the amount of accumulated fees that the borrower will incur if the agreement is rolled over.

Consumer Credit Regulation: 12.2.4.46 Utah

Auto title lending is authorized in Utah by the Title Lending Registration Act.196 The law does not contain any interest rate or fee caps, and rollovers are permitted.197 The law prohibits a lender from making a loan without considering the borrower’s ability to repay, and further requires the lender to examine the borrower’s income, expenses, and employment.

Consumer Credit Regulation: 12.2.4.48 Virginia

Auto title lending is authorized in Virginia.198 The law applies whether or not the lender is physically located within the state, and applies to loans made over the internet to Virginia residents and any individual who is in Virginia.199 The monthly interest rate cannot exceed 36% annually, but a monthly charge of 8% of the loan amount or $15, whichever is less, is also permitted.200 Fees

Consumer Credit Regulation: 12.2.4.51 Wisconsin

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

Consumer Credit Regulation: 12.3.2 Auto Title Lenders Claiming to Be Credit Services Organizations

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.

Consumer Credit Regulation: 12.3.3 Lease-Back and Buy-Back Schemes

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.”

Consumer Credit Regulation: 12.4.1 CFPB Rule Regulating Auto Title Lenders

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.

Consumer Credit Regulation: 12.4.3 Truth in Lending Act

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.