Collection on Title Loan

If I default on a title loan can the lender repossess my vehicle?

I put my car title as collateral on a loan. I have been experiencing financial difficulties and have not made a payment in 45 days and they have issued a warrant in debt for me. They have made no attempts to repo the car but they still have the title. Do they have to repo the car first and then hold me responsible for any remaining balance if any? If not why won't they give the title? Do they have to get the judgment before they can repo the vehicle even though they already have the title?

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Highlights


  • Avoid a title loan if possible.
  • Title loans come with a high APR.
  • Repossession is probable if you fail to pay a title loan.

A "title loan" offers the consumer cash from the lender in exchange for the title of a paid-for vehicle to secure the loan. (The titled property can be a passenger vehicle, motorcycle, boat, or airplane.) Typically, these loans are due back in full 30 days later. There's no credit check and only minimal income verification. The fees range from $80 to $100 for a loan amount of $500. The annual percentage rate (APR) on these loans can be as high as 250%. By federal law, title loan lenders must disclose the interest rates in APR terms, but it is common for title lenders to hide the APR in favor of a monthly rate, which appears less usurious. Many states regulate title loans.

Quick tip #1:  

If you are struggling with debt, get a no-cost, no obligation analysis of your debt options from a pre-screened debt relief provider.

It is common for title lenders to accept interest-only payments for an extended period of time, which causes the consumer to in a very short period of time pay more in interest than the amount borrowed. The lender has the right to repossess the titled property if the consumer defaults on the loan.

Because of the very high interest rates and stiff fees and high risk for losing a vehicle they have paid for, consumers should avoid title loans.

Importance of State Laws

Regarding your question, "Do they have to repo the car first and then hold me responsible for any remaining balance if any?" The answer to this question depends on the laws in your state of residence.

Here is the worst-case scenario: For the sake of argument, let us say that the vehicle has a fair market value of $1,000 and that you got a title loan of $400. Let us also assume that you repaid the creditor $0. The creditor has the right to repossess the vehicle, sell it, and if there is any balance left over after paying the interest, balance, and auction fees, you will receive that surplus.

Now let us change the facts and say that for the sake of argument that the vehicle has a fair market value of $1,000 and you got a title loan of $3,000. Let us assume again that you repaid the creditor $0. The creditor repossesses the vehicle and sells it for $1,000 and tacks on $500 in fees and interest. You would be liable for the deficiency balance of $2,500.

Regarding your question, "Do they have to get the judgment before they can repo the vehicle?" the answer is "maybe" and is dependent on your state of residence. In some states the creditor being on the title gives them the right to repossess the vehicle. The vehicle is, after all, in the creditor’s name. In other states lenders will not take possession of a vehicle but instead file a lawsuit to collect the balance due plus court costs and finance charges. You did not mention your state of residence, so it is impossible for me to say what your rights are in your state.

I hope this information helps you Find. Learn. Save.

Best,

Bill

Bills.com

50 Comments

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  • JT
    May, 2013
    james
    Can a title loan company file chapter 32 felony against me in the state of Texas after I defaulted on $550 loan after 6 payments
    0 Votes

    • BA
      May, 2013
      Bill
      Allow me to make three points before answering your question:
      • District attorneys, attorneys general, and special prosecutors may charge a person with a crime. Lenders, such as credit card issuers, banks, credit unions, title and payday lenders, do not have the ability to charge people with crimes. A lender who thinks a customer committed a crime is allowed to share that information with a prosecutor. However, just because a lender says something like, "We'll ask the DA to charge you with a crime," does not mean the DA will do so. This leads me to my second point.
      • Fraud is a crime of intent. A prosecutor needs to prove beyond reasonable doubt to a jury that the defendant "...intentionally or knowingly (made) a materially false or misleading written statement to obtain property or credit..." Texas Chapter 7 § 32.32.
      • Let us assume for the sake of argument a local DA could prove you intended to commit fraud. Under § 32.32, the threshold for a felony conviction is $1,500. I would argue a $550 title loan would be considered a Class A Misdemeanor, and not a felony under § 32.32.

      Getting back to my second point, it seems to me your making six payments is strong evidence you intended to repay the title loan. A prosecutor would need compelling evidence to the contrary that overcomes your payment history. A prosecutor would need an admission from you to the effect of, "I planned all along to rip-off that title lender," to show you intended to commit a crime.

      My advice? First, read § 32.33 to understand Texas' law regarding hindering a secured creditor. If the title lender seeks to repossess the vehicle and you conceal it, you may be guilty of felony. Second, consult with a Texas lawyer who has consumer law experience to learn more about your rights and liabilities.

      0 Votes

  • KR
    Apr, 2013
    kathy
    I currently have a title loan in Illinois. I recently found out that according to Illinois law, "Lenders may not take keys or copies of keys as security. 38 Ill Adm Code 110.390(a)". My question is this, if this is the case, why then did the title loan company make a copy of the key?
    0 Votes

    • BA
      Apr, 2013
      Bill
      Perhaps because it is not aware of Illinois 38 Ill Adm Code 110.390(a), or because it does not care it violated the law by doing so.

      I think perhaps you were really asking, "What can I do if a lender violates 38 Ill Adm Code 110.390(a)?" Consult with an Illinois lawyer who has consumer law experience to learn what, if any, recourse you have against the lender. If you cannot afford a lawyer, visit the Illinois Legal Aid Online Web site to find a lawyer in your area who provides legal services to people with low or no income.
      0 Votes

  • JL
    Mar, 2013
    Joe
    We went to Loan Depot in Granbury, Texas and took a $400 title loan on a minivan worth $1,500 but couldn't pay. It was repossessed and they stored it for the last 2 years. They didn't try to auction or sell it. Now, they want us to pay $1,300 in storage and fees. Since it was their fault for not trying sell it, I don't see how they can say we owe them more money when they repo'ed it and have the title! Can you tell me if this is legal or possible?
    0 Votes

    • BA
      Mar, 2013
      Bill
      What you described is not permitted under Texas Business And Commerce Code, Title 1. Uniform Commercial Code, Chapter 9, Sec. 9.615. Under the UCC, the secured party (here, it's Loan Depot) must act in a "commercially reasonable manner" to sell or auction the vehicle, and give you any surplus from its sale. If, as you mentioned, the vehicle was worth $1,500 when the vehicle was repo'ed, you owed Loan Depot $400, and for the sake of argument it sold the vehicle right away for $1,000, Loan Depot would owe you $600 minus any repo fees.

      Consult with a Texas lawyer who has experience with consumer law to learn how to answer Loan Depot's unreasonable claim against you.
      0 Votes

  • AS
    Feb, 2013
    Aaron
    What are the repo law(s) in the state of Kansas/Missouri? $2,000 loan out. The vehicle is in Kansas but got the loan from Missouri.
    0 Votes

    • BA
      Feb, 2013
      Bill
      Let us start with two brief reading assignments for you:
      1. Read Missouri Collection Laws to get a basic understanding of Missouri's consumer protection laws.
      2. Read Kansas Collection Laws to get a basic understanding of Kansas' consumer protection laws.
      In Kansas, a lender must give notice before it can repossess a vehicle. The lender can repossess the vehicle on its own, and does not need the court's permission or involve the local sheriff. If the collateral is worth less than $1,000, the lender may not collect a deficiency balance. See Kansas Statute Chapter 16a Article 5 to read Kansas' laws.

      Missouri's laws are similar, though there is no restriction on collecting any deficiency balance. See Missouri Section 400.9-101 to read the statute.

      Implied in your question is which state's laws apply. Dig out your loan contract and see if it contains a choice of laws clause. If it does not, consult with a lawyer in your state of residence to learn which state's laws apply. If you are a Missouri resident, the answer to your question is easy. If you are a Kansas resident, then which laws apply is a bit more complicated.
      0 Votes

  • TJ
    Aug, 2012
    Tammy
    My fiance took out a title loan here in GA. He hasn't been able to make good on it. We tried to work out an different payment planned but were denied. Now an "agent" is threatening to put a warrant on him in our county. Can they do this? I thought it was a civil matter.
    0 Votes

    • BA
      Aug, 2012
      Bill
      I cannot find any Georgia law criminalizing the failure to repay a title loan. See Georgia O.C.G.A. § 44-12-131 to learn more about Georgia's title loan laws.

      In all states, arrest warrants are created by judges and magistrates, and not creditors. The collection agent violated the Fair Debt Collection Practices Act when he or she threatened your friend with arrest.
      0 Votes