Laws to Know About Texas Car Title and Payday Loans
In Texas, the Texas Fair Lending Alliance reports that consumers who receive payday or title loans pay about $23 for every $100 borrowed. Of those who do take out these cash loans, much of the money is used to cover rent, car loans, and utilities. People who use Texas payday loans or title loans to cover bills between paychecks have little other choice as they do not qualify for traditional bank loans. If you’re one of the thousands considering Texas title or payday loans, here are a few of the laws that can help you decide which payday loan company is best.
General Laws Regarding In-Person and Online Payday Loans in TX
Per the Texas Administration Code 83.604, Texas does not have a maximum payday loan amount, but there is a limit of 7 to 31 days for the length of a payday loan. The most a company is supposed to charge you is $18 for each $100 for a loan of $300 or $8 for every $100 borrowed on a loan of $2,500. Companies may also charge administrative fees of $25 for loans of $1,000 or more or $20 for loans of less than $1,000. If you do default on your loan, the company can then charge $5 per every $100 borrowed.
To break this down, if you borrowed $500 and the fee was $18 per $100. You’d originally owe $500 plus $18 times 5, which totals $90. You go on to default and now owe the original $590 plus another $25 in fees for defaulting, plus you might face fees from your bank for the post-dated check that has now bounced.
What’s most important to understand is that when you borrow money from a payday loan online in Texas, or even a loan you take out in a storefront, you must pay it back. If the payday loan company goes to cash your post-dated check and that check bounces, they may threaten or actually have you charged with breach of contract. This practice is illegal, so if you run into it, let them know that threatening to arrest over unpaid debt is illegal in Texas and that you’re contacting an attorney.
Texas car title loans are different. Instead of a post-dated check due on the repayment day, you put your car’s title up as collateral. If you fail to repay the loan amount and fees, the title loan lender in Texas can take possession of your car. If you want your car back, you may be required to pay the original loan amount, towing costs, and storage fees.
TX Car Title and Payday Loans Laws For Specific Areas
In addition to Texas payday loan and title loan laws, there are often laws applicable to certain towns and cities. Dallas payday loans are restricted by two ordinances passed in 2011. Stores offering payday loans within the city are restricted to operating in certain areas and there is a limit on how much you can borrow with payday loans in Dallas.
In 2016, the payday loan industry in Killeen, TX, was met with new regulations. Lenders must ensure the borrower is not borrowing more than 20 percent of his or her monthly income. Plus, Killeen payday lenders cannot operate without a city permit.
Even car title loans in many cities in Texas are seeing new regulations. Cities like Austin, Dallas, Houston, San Antonio and dozens of others limit title loans to 70% of the car’s current value and 3% of the borrower’s yearly income, whichever is lower. These same cities are also working on passing two bills that would restrict borrowers from rolling over a payday loan more than three times and each time 25% of the amount borrowed would need to be paid off before the Texas payday loan company could approve the rollover.