A title loan is a fairly simple transaction in which a sum of money is given out, with the person receiving the money putting up their car as collateral.
It would seem simple enough, but in truth, these loans are often semi opportunistic in nature and occasionally toe a fine legal line. As a practicing law professional, many cases you’ll see will often relate to title loans as people find them an attractive way to receive a loan quickly without having to use a bank. This can result in a client losing their car which is likely vital to how they conduct their day to day life. Many people who try to take advantage of title loans are already in a tough spot financially, so it’s important to understand the nuances of title law in your particular state if you plan on giving them a proper understanding of what legal situation they have found themselves in.
Understand Repossession Laws
When someone defaults on a title loan, it varies state by state as to how soon and how aggressively the title loan company can go about repossessing someone’s car. Certain states like New Mexico allow for immediate repossession of the vehicle while other states have a mandatory grace period, for instance, in Kansas at least 10 days must elapse before repossession efforts can begin. Of course a title loan company has no use for the cars themselves, so these laws are often put in place to allow the customer sufficient time to get their loan payments in order to prevent their cars from being sold off. If you have a client that is trying to get restitution for their car being sold too hastily, knowing your state repossession laws is essential to your case.
Terms of Loan Laws Vary By State
Another aspect of proper understanding of title loan laws is that the terms of a legal title loan vary state by state. In some states such as California, a title loan cannot be less than $2500, which means that title loans in Los Angeles will be different than, say a title loan in Chicago, where people can only be loaned up to 50% of their income or $4000, whichever is highest. Most states also have laws that govern the minimum amount of time a loan has to be taken out of, with minimum terms of 6 or 10 days being common across many states. Also, yearly APR rates are often regulated as well, which is another important aspect to consider when looking over a client’s title loan case. Any of these small nuances can give you an upper hand in negotiating a proper settlement for your client, as poking a hole in one small aspect of the loan may be enough to gain a very solid legal foothold.
Whether you’re a lawyer working for a title loan company or for a title loan client who wants to litigate, it’s extremely important to understand how your individual state looks upon title loans. In some states they are fairly unregulated and it’s more of an everything-goes kind of situation, while other states have aggressive consumer protection laws. Knowing exactly what flies in your state as far as title loans are concerned is vital to arguing a case properly.