What Title Loan Changes are Coming?
The car title loan industry always seems to be changing with new regulations. Since it is known that these loans carry high interest rates, politicians are trying to protect consumers. As with our site, we try to help educate the consumer before they sign-up for an auto title loan. However, due to these changes, it could slow online lending. This is just an assumption, but let’s try to breakdown these updates on the ever-changing regulations that pertains to these types of loans.
There is always discussions that new laws and regulations will destroy the car title loan industry, but it really depends on which party is elected into office. It seems as though the Democrats want to place more safeguards on the industry, whereas the Republicans seem to let the industry run as status quo. Some pundits were predicting that the entire industry would be shut down. Although those predictions did not come to fruition, there seems to be more regulations to slow the industry down. Here is a breakdown of some of the more recent changes:
- Limits are set as to how many of these loans a consumer can have.
- APR limits are being placed so lenders cannot go over a certain limit.
- Charges that lenders can place on the consumer are limited, too.
Will these changes be placed into law? I don’t know anymore than the next person and I don’t claim to have a crystal ball. But as a consumer it is advisable that you review the state law in which you reside in to determine how these loans will affect your financial situation. As an example the assembly bill 539 in California is capping interest rates at 36% for title loans.
I’ve been around the financial and insurance industry for decades and I can tell you that these two industries are always behind the curve when it comes to technology. When I tell people this they look at me with skepticism. How can these juggernaut industries not lead the way? I understand the skepticism, but it’s true. There is typically a lot of paperwork that needs to be filled-out and the review process to deny or accept an application is usually done by an underwriter. Now the times are catching-up with these companies and they’re seeing the light. They are embracing technology and seeing them approve applicants in a matter of hours compared to a matter of days or weeks. Instead of having manual reviews completed by human, they have software determine if the applicant can be approved. It streamlines the entire process. Even though the internet has been around for decades, these companies are just now using the benefits of this technology to pull their resources together to speed up the loan process.
With all the changes that have been made to the industry and all the possible changes coming down the pipe, you would think there would be more and more companies withdrawing from the industry. Although commons sense would suggest this, the opposite is true. Because of the reach these companies have online, they can offer title loans in more states. Brick and mortar stores area thing of the past and this industry is pushing forward, aggressively. More and more companies are entering the industry and providing title loans online. Now there are companies lending in California. Since California is a Democrat run state, they have more regulations than other conservative states. This has typically turned-off companies from lending there, but things are changing and changing quickly. Companies are starting to lend in California at break-neck speed.
When looking at the car title industry from a top-level perspective you see that technology is ramping up the process of expediting these loans, and the politicians are scrambling to curb the acceleration of these loans. The last thing regulators wants is another mortgage crisis. The application and approval process was so easy prior to the sub-prime mortgage crisis that it led to too many people being approved for mortgages they could not afford. We’ll see if technology will lead to more defaults in the industry. I’m not as concerned as others, the online car title industry is a fraction of the size of the mortgage industry. If I did have a magic ball, I’m not particular concerned about technology having a negative affect on this industry.