Are Title Loans Legal in Arizona?

Car title loans, also known as secondary motor finance lines in the Arizona Revised Statutes, are cash loans that are backed by the equity in a vehicle. If the vehicle owner does not pay back the loan with interest after a month, the owner may renew the loan, or the loan company has the legal right to seize the vehicle. According to Jean Ann Fox of the Consumer Federation of America, the state of Arizona allows title loans and limits the amount of interest that a company may charge on such a loan.

Interest

Per 44-291(G) ARS, Arizona title loan companies may not charge a monthly finance rate in excess of 17 percent for vehicle loans of $500 or less in value. For loans more than $500 and less than $2,500, a finance company may not enforce a finance rate of more than 15 percent monthly. The state limits interest rates on secondary car loans between the amount of $2,500 and $5,000 to 13 percent, while all loans over $5,000 can incur a maximum monthly finance rate of 10 percent.

Contract

Under 44-287 ARS, a Arizona title loan contract must contain the names of the buyer and the seller of the loan as well as a description of the motor vehicle. Loan providers must provide the borrower with the annual or monthly vehicle financing rate in clear terms. According to 44-290 ARS, the buyer of a loan may request that the lender issue them a written statement that outlines all payment due dates and the amount of payments for recordkeeping. Title loan recipients have a right to a written receipt for any payments made in cash.

Penalties

Secondary loan companies may assess late penalties for delinquent payments not made 10 days after the due date according to 44-291(E) ARS. These organizations may not charge more than 5 percent of the unpaid balance of the Arizona title loan as a penalty, and they must clearly disclose these penalties in the sales contract. The title company may seize a vehicle per the loan agreement if the borrower does not pay the loan back 11 days after the payment due date.

Remedies

If a Arizona title loan company deliberately tries to collect more than the interest allowed by law or does not have a current license to issue loans, the person who took out the loan does not have to pay back principle, finance charges or penalties according to 44-291(H) and 44-295 ARS.