California Title Loan Laws
For the past few years, California has been in the spotlight when it comes to California title loan laws because of the state law. It wasn’t long ago that state officials from the California Department of Business Oversight were making a point of notifying consumers of the risks associated with these loans. They have been available for some years, but there was a sudden increase that almost doubled the amount of the principle in only one year (State Urges California Consumers To Be Wary of Auto-Title Loans.) For this reason, it’s important to understand title loan rules in California and California title loan repossession laws.
So, What are title loans?
Title loans are when a lender gives the consumer a loan and holds the clean title to the consumer's vehicle as collateral if the loan isn’t paid back. It is a different way of getting funding when it’s needed and is particularly easy to obtain because they are available to anyone despite credit rating or bankruptcy.
Title loan laws in California do not have any requirements on the side of the lender. There is no specific requirement for the car that a creditor can accept, but it is up to the creditor what their requirements are. Most lenders prefer cars under ten years old in good running condition, unless it is a vintage car. California title loan laws don’t specifically state what lenders can and cannot require. However, there are some title loan laws in California that are very specific on compared to other states.
California title loan laws dictate that the minimum amount that must be borrowed is $2500. Anything lower is not accepted when it comes to a title loan, but there are other places available to get small amounts. These would more likely be payday loans.
Title Loan Interest Rates
If the loan is at exactly $2,500, title loan laws in California allow for the lender to charge either $50 or up to 5 percent of that amount (Car Title Loan Laws and Regulations.) This is the specified interest cap. Anything up to $4999 can go up to $75. Any loan amount higher than that does not have a capped interest rate. There are rules for what the lender can charge when the consumer is late on a payment. In that case, they are allowed to charge $10 every day for ten days only, and then it increases $15 per day.
Other than interest rates, the title loan laws in California allow the lender to charge various processing or administrative fees. However, they are required by California title loan laws to keep the consumer informed of the total fees and the interest rate they are charging before any contract is signed. On the contract itself, this information must be displayed in a pronounced manner (Automobile Title Loan Consumer Advisory).
Other Title Loan Laws
Lenders may only use vehicles as collateral. They cannot legally hold any real estate as collateral. Also, title loan rules in California states that car title loans must be amortized entirely. This means that with every payment that is made, the payment goes towards both the interest and the principal amount.
Repossession is when a specific repossession agency takes property that was sold under a contract as collateral. In the case of title loans, they are taking the vehicle that was used for the loan. There are some regulations that must be followed according to California title loan repossession laws.
If a Payment is Missed
Sometimes there is a certain amount of time that is allowed before the vehicle is up for repossession. This gives the consumer time to catch up on what they owe and possibly keep their vehicle. According to California title loan repossession laws, the lender has the right to take the vehicle as soon as payment is one day late. Also, the lender doesn’t have to give you any prior notice that it will be taken. The specifics should be written in the title loan contract so that the consumer understands. It is important to note that the vehicle can also be repossessed at any time that the consumer isn’t following the requirements written in the contract, such as a lapse in insurance.
What Restrictions Do Title Loan Requirements in California Provide?
Title loan regulations in California dictate that the repossessor can enter the unsecured area to take the vehicle. This includes private property but does not include a garage, entering locked gates or fenced area without permission from the legal owner.
According to title loan requirements in California, there is no requirement for lenders or repossessors to inform local authorities before they repossess a vehicle. They must inform local authorities within one hour after the repossession takes place. The repossession agency must also inform the owner that their vehicle has been repossessed, but they have up to 48 hours to do so, or 72 hours if it’s a weekend. It must be either in person or by mail. The mail would have to be sent out within the 48 or 72 hours, but it doesn’t mean the consumer will have it by then due to the length of time it takes for mail to be delivered.
Title loan regulations in California provide that the repossessor has the right to take the vehicle whether or not the previous owner is present. If they are present and give the agency the amount owed right then, the agency is required to forward it to the lender and cannot take the car. The borrower also has the right to an itemized receipt.
Hiding a Vehicle to Avoid Repossession
It is against the law to protect a vehicle to avoid repossession. In fact, California title loan repossession laws state that no one is allowed to remove the vehicle, hide it, or get rid of the vehicle to keep the vehicle. If it is normally maintained in a rented garage or private storage area, the renter must notify local authorities with 24 hours of receiving the vehicle.
Who Can Legally Repossess the Car?
Not anyone can only repossess the vehicle. According to state law, the agency or person must be registered with the Bureau of Security and Investigative Services (BSIS), which is under the Department of Consumer Affairs (Consumer’s Guide to Repossession Practices.) The owner of the vehicle may ask to see the ID of the persons to ensure that they fulfill this, but it doesn’t cover all cases. Occasionally, the lender or bank may send an employee to recover the property. This is allowed under California law, as long as they are regular employees included on the payroll of the legal owner (of the loan and collateral). License verification can be obtained at www.bsis.ca.gov.
The tow truck that is taking the car away must show the agency license number on it. The name of the company is not required.
Rights After the Vehicle is Repossessed
In addition to the required notification within 48 hours, the notice must include the name and number of both the repossession agency and the legal owner. The borrower must be given an inventory of their personal effects that were left in the vehicle when it was taken. Information must be given about where the vehicle is being kept and how to get the vehicle back after repossession.
The repossession agency must keep the personal effects of the borrow for at least 60 days before it can be discarded or sold. This does not include anything extra that was added to the car during the ownership of the vehicle, such as a new radio system. The repossession agency may charge a fee daily for the 60 days, and they must keep the inventory of the personal effects and when/to whom they were distributed.
Selling the Car
The lender must inform the borrower of their intent to sell the car with at least 15 days notice, and the notice must be sent via flirt-class or certified mail. The Notice of Intent to Sell must be served to the borrower within 60 days of the repossession, and the consumer has the right to ask that the sale is put on hold for ten days.
If the car is sold for a higher amount than the amount owed on loan, they must return the extra money to the borrower within 45 days. If the amount it was sold for doesn’t cover the remaining loan balance, the borrower is required to pay the rest of the loan off. This must go through court, as the lender must serve a Complaint. The borrower has the right to answer and defend them in court.
Right to Get the Car Returned
California law gives the borrower the chance to get their vehicle back and reinstate the previous loan. This may happen anytime before the sale of the vehicle, and the lender must return the car to the previous owner. The borrower also has the right to reinstate the previous loan contract only once over a period of 12 months. This may only happen twice over the time of the contract.
The Lender’s Right to Keep the Vehicle (California Civil Code)
The lender can keep the vehicle if they can prove that the borrower hid the vehicle in any way in order to avoid the repossession, if the vehicle was used in a criminal offense, if it was damaged or almost damaged so that the value of the vehicle would be reduced, or if the borrower gave false information on the loan contract in any way. In these cases, the lender may keep the vehicle.