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Texas Consumer Loans (Installment, Payday and Car Title Loans)

 

Texas Consumer Loans Explained! (Installment, Car Title and Payday Loans)

In almost every city in Texas there are installment lenders, car title lenders and payday lenders doing business and providing a valuable service to their communities.  According to the Texas OCCC (Office of Consumer Credit Commissioner) there are over 1,200 registered regulated lenders and over 2,000 registered CAB lenders (formerly known as CSO or Credit Service Organization). Our latest loan software product LP3 (Loan Plus 3) was developed to work for all types of lending regulated by the Texas OCCC.  The following article explains the differences between each type of lending and what finance each lending type falls under. 

Laws governing lending practices in Texas are defined in the Texas Finance Code Chapter 342 Subchapter E, Subchapter F and Chapter 393.  According to the OCCC there are thousands of consumer lenders doing business in Texas, CAB or Credit Access Business is the most common type of lending and follows lending practices defined in the Texas Finance Code under Chapter 393.

We have been providing regulated lending software for over 25 years and have been reviewed and listed by OCCC http://occc.state.tx.us/pages/industry/Reg_Loan/reg_vendors.htm as a regulated Loan Software Vendor. The following information is our interpretation of the state documents that define lending in Texas. We are not a law firm and do not give legal advice. This article is for informational purposes only. Please verify all state laws with a licensed attorney or state government agency.

Let’s go over each chapter and subchapter below.

Chapter 342 Subchapter E (section E)

In the Texas lending industry this type of loan is known as E Loans or Large Loans.  Section E is in parenthesis because the specific section defines the way our LP3 loan software automates the calculations and servicing of this type of loan.  For the consumer this type of lending is most often called a car title loan or secured loan. Securing the 342E loan is not required by law, but most lenders do prefer to secure the loan with a car title or personal property. Below are some important details of this type of lending.

License needed = Regulated Lender License 

Max Loan Amount = $15,700

APR =   30% for advances up to $3,150, 24% ($3,151 - $6,615), 18% ($6,616 - $15,750)

Admin Fee = $25 (cannot be charged more than once in any 365-day period)

Additional Fees = Title lien fees, repo fees, attorney fees or any other fees associated with collection of the loan can be charge back to the customer.

Pay to others = Lenders can pay off other outstanding loans the customers have directly.

Sample Loan (unsecured)

Amount Financed

$10,000

Terms (months)

24

Regular payment

$482.47

Admin Fee

$25

Handling Charge

$1,555.37

Gross Loan (Amt Fin + Acq + handling)

$11,580.37

APR

14.5 %

 

 

 

Chapter 342 Subchapter F

These types of loans are known in Texas as small loans or signature loans.  They are called signature loans because the lenders normally do not require a security make or service the loan. Lenders can require a car title or personal property to secure the loan, but most lenders do not. The majority of 342F lenders do not secure the loan because they cannot pass on to the consumer the cost of putting a lien on the title or cost of repossessing the car. 

License needed = Regulated Lender License

Max Loan Amount = $1,260

APR = depends on loan term and amount

Acquisition Fee = $10

Additional Fees = No

Pay to others = No

Sample Loan

Amount Financed

$1,200

Terms (months)

12

Regular payment

$148.88

Acquisition Charge

$10

Handling Charge

$575.96

Gross Loan (Amt Fin + Acq + handling)

$1,785.96

APR

80.63 %

 

 

 

Amount Finance

$500

Terms (months)

8

Regular payment

$83.75

Acquisition Charge

$10

Handling Charge

$160

Gross Loan (Amt Fin + Acq + handling)

$670

APR

84.06

 

 

 

Chapter 393 CAB or Credit Access Business

The majority of lenders currently doing business in Texas are registered with the OCCC as CAB (Credit Access Business).   These are the payday lenders and can also advertise themselves as car title lenders.  CAB acts as a loan broker to a lender that charges less than 10% APR for the loan, but CAB can add on fees to the loan for their services. 

License needed = Credit Access Business License

                Another requirement is a third party lender that is willing to loan at less than 10% APR

Max Loan Amount = No Limit

Rate = $15 seems to be the norm, some lenders charge upwards of $30 per  $100 borrowed

APR =   Depends on the rater per $100

 

Sample Unsecured Loan

Amount Finance

$1,000

Terms (weeks)

2

One payment

$1,153.80

Rate

$15 per  $100

Finance Charge

$153.80

CAB Fee

$150.

Lenders Fee

$3.80

Gross Loan (Amt Fin + CAB Fee + Lenders Fee)

$1,153.80

APR

399.88%

 

 

 

Reference: www.occc.state.tx.us           

817-595 0550 * CFS Software * http://www.smallloansoftware.com

Comments

In that first table, I'm not able to follow along with how you arrived at the 14.5% APR. IF the numbers are correct in the table, then the total interest charge is $1,555.37 over 2 years. On a $10,000 loan that's about 7.8% per year. 
 
I tried to find a rate cap at the OCCC website or other guidance about what handling charge could be charged on such a loan with no luck. 
 
Any clarification would be helpful. Thanks!
Posted @ Thursday, October 02, 2014 1:40 PM by Christopher
Christopher, 
 
Sub Chapter E is up to a 3 tiered loan type based on the amount of the loan and the time frame of the loan repayment. Out of 500 customers only a couple have made loans under this loan type. It just has not been a practical loan type for many of our 20+ year customers to use. If you would like to discuss further I would be happy to do so with you. Our main number is 817-595-0550 and ask for Damien or Sak
Posted @ Thursday, October 02, 2014 2:06 PM by Damien
Thanks for the response! 
 
I was trying to figure out the calculation to arrive at the Handling Charge in the first example and I think your answer guided me to the right spot in code 342. It’s $8/$100/Year above the first threshold amount ($300). $9700/100*8*2 = $1,552, plus there’s some small additional interest earned on the first $300 which I’m sure gets us the rest of the way. 
 
I was stuck on the later amounts where the handling charge seemed to be $4/$100/month (rather than year), which is why I was stumbling. 
Posted @ Thursday, October 02, 2014 2:17 PM by Christopher
Hi, 
I'm doing research for my boss on what all we will need to obtain to operate a auto title loan and installment loan business out of his current business. do you know what licenses you need in Texas to do so?
Posted @ Tuesday, October 07, 2014 12:58 PM by Meagan
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