Center for Responsible Lending Car Title Loans Report

POLICY RECOMMENDATIONS• The Consumer Financial Protection Bureau should promulgate regulations that rein in unfair,abusive, and deceptive car-title loan terms. Lenders should be required to evaluate a borrower’sability to repay the loan and meet other expenses without taking out a subsequent loan.• Many states with car-title lending have caps of around 36% on the annual interest rates thatmay be charged for small loans. States that have granted exemptions to these interest rate limitsto car-title lenders should revoke them, and states that have not should refrain from doing so.• States that continue to authorize car-title lending should require that loans be structured asinstallment products with amortizing equal monthly payments, full consideration of the borrower’sability to repay the loan and afford other expenses, and reasonable rate limitations.• State policymakers and regulators must remain vigilant in enforcing or strengthening theirstate lending laws. They should rein in evasion from car-title lenders, who sometimes seek totake advantage of narrow definitions, loopholes, or gaps in laws to charge higher rates than thelegislature intended.• In the event of a default, borrowers must be provided important consumer protections, includingnotice prior to repossession or sale of the vehicle, a right to redeem the vehicle, and a ban ondeficiency balances (in which the borrower owes fees to the lender if the sale of their car does notcover the outstanding debt owed). Sale of repossessed vehicles should be commercially reasonablewith any surplus returned to the borrower.• In addition to substantive protections, the Consumer Financial Protection Bureau and states withcar-title lending should collect and make public more data on title lending to allow for policyanalysis on the borrower impact and various public policies in place to regulate the practice.128The State of Lending in America and its Impact on U.S. Households