Although California's consumer protection laws offer broad protection to most consumers who conduct business in the state with licensed businesses, it does not regulate most title loan lenders. For the most part, title loan lenders are unregulated in California because of the legislative loophole in lending laws. The California Attorney General's Office and the California Department of Corporations are responsible for enforcing and regulating finance lending laws in the state.
California Department of Corporations
The California Corporations Code and Financial Code requires financial service companies, investment brokers, stockbrokers, payday loan lenders, escrow companies, consumer debt resolution companies and mortgage lenders to obtain a state license before they can conduct business within the state. The department has the legal authority to file civil complaints against violating companies, revoke licenses, censure and suspend licenses. The California Department of Corporations can also work with the California District Attorney's Office to file criminal charges against unauthorized lenders or lenders who violate the state's usury laws and other consumer protection regulations.
Article 15 California Constitution
The California Constitution, Article 15, covers loans for personal, family or household purposes. For these types of loans, California's usury law prohibits lenders from charging more than 10 percent annually on loans based on the unpaid balance. The California Constitution does not apply to loans not used for personal, household or family reasons. However, although title loan lenders are exempt from Article 15 of the California Constitution, they are subject to maximum interest rate laws.
Pawnbrokers
In California, pawnbrokers are those who receive goods and are engaged in selling them. Furthermore, pawnbrokers that accept automobile pledges as security for a personal loan are included in the state's definition. Pawnbrokers can charge allowable interest rates determined by California statute, and they may not charge more than 2.5 percent per month. Alternatively, California considers title loan lenders as personal property brokers. Personal property brokers and pawnbrokers are subject to the same types of usury interest caps.
Finance Charges
According to the California Department of Justice, Attorney General's Office, there are no finance charge limits for personal, family and household good loans. Thus, pawnbrokers and finance companies that offer title loans are largely unregulated, and the lender can pursue claims for an unlimited amount against borrowers who default on their loans. The California finance lenders law allows lenders to repossess vehicles after one default, and their rights to repossession are incorporated in their contracts.
Considerations
Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.
Title loans are the best way to get cash when you want quick cash. It is the most easiest and convenient method to get relief during your hard times but you should have a proper understanding of how car title loans work. They are designed in such a way that almost everyone can get a loan using their vehicle's title and they will be able to receive cash the same day.
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