Today's Trends in Credit Regulation

Title Lending Legislative Developments
By Catherine M. Brennan

As with all other areas of lending, state legislators across the United States are eyeing legislation to upend or tinker with title lending statutes that allow lenders to make a loan to the consumer based on the value of the consumer’s vehicle. In 2011, state legislators have unleashed a number of statutes that are bound to keep title lenders and their lobbyists active.

One of the more active states on the title lending front is Virginia, which is one of the few states out of its surrounding states to permit title lending. Senate Bill 1367 – which has passed both the Virginia House and Senate – would allow car-title lenders to extend loans to owners of cars titled in other states. Officials in the District of Columbia and Maryland, both of which effectively ban title lending, had indicated concern about this development in Virginia. Virginia Governor Robert McDonnell, a Republican, has not stated whether he will sign the legislation.

In Florida, House Bill 877 (crossfiled with Senate Bill 990) would make clear that only the state – and not counties and municipalities – has the power to regulate title lenders. HB 877 also transfers regulation of title loans from the Office of Financial Regulation to the Department of Agriculture and Consumer Services. The bill would ban title lenders from making payday loans from the same location or from any location within 1,000 feet of the title lender that shares common equitable ownership with the payday lender. SB 990 also provides that the maturity date of the title loan agreement cannot exceed one year from the date of origination.

Colorado House Bill 1139 would prohibit a creditor from collecting a debt owed from a title loan from the debtor personally unless the creditor first collects its debt by taking and selling the car and the proceeds from that sale do not satisfy the loan balance.

Meanwhile, Tennessee Senate Bill 1485 (crossfiled with House Bill 1551) requires title pledge lenders to furnish the pledgor with a statement at least five days prior to the beginning of any period of renewal of the title pledge agreement that includes the agreement number, the annual percentage rate, the monthly rate of interest, the monthly fee rate, the original principal balance of the loan, the current payoff balance of the loan, the amount of all renewal fees, and the amount of any interest, fees or other reimbursements permitted that have accrued since the last statement was issued to the pledgor. The statement must also include the payment amount required to pay off the title pledge loan in full if such payment is made with cash or certified funds by the end of the title pledge agreement or any renewal of the title pledge, and the exact date through which that payoff balance will be honored. Finally, if the title pledge loan is past due, the statement must also include the number of days past due as of the statement date, the minimum payment required and the exact date by which such minimum payment must be received in order to reinstate the account to current status. This disclosure provision intends to give the consumer more information about his obligations, with the goal that the consumer might make more “informed” decisions about the use of this credit product. SB 1485 also imposes new requirements for repayment of the loan.

Meanwhile, New Hampshire Senate Bill 57 would remove the 36% yearly interest cap on title loans to authorize lenders to charge 25% interest per month. The legislation also decreases the number of renewals permitted by one, and requires a 10% principal reduction at each renewal. This legislation has cleared the Senate. Given that it represents a loosening of credit, industry observers are watching to see if this gambit succeeds in the Granite State.

Finally, one bill worth watching – Missouri Senate Bill 125 – would make clear that title lenders must make title loans under the provisions of Missouri Business and Financial Institutions Title specifically applicable to title lending. Some lenders had looked to other state licensing laws – including the consumer installment lender license – to originate title loans with terms that exceed what licensed title lenders can charge. SB 125 would reform those loans to apply to any lender that makes titles loans disguised as another credit product.

Catherine M. Brennan is a partner in the Maryland office of Hudson Cook, LLP. Cathy can be reached at (410) 865-5405 or by email at

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