The past calendar year has brought many changes to the car title loan industry. New regulations are in place by the CFPB that affect both payday and pink slip lending. These rules may significantly curtail online lending. There have also been new advances brought forward with online title loan. We are now seeing more companies come into the fold of providing loans. Over the past few months 3 new lenders began funding loans in many of the largest states. Let’s break down these changes and attempt to forecast what’s going to occur over the upcoming months and years.
There’s been a lot of talk recently about new laws and regulations that may be put into place to “reign in” the online title loan industry. Many of these regulations were forecast before the recent election results. With the surprise Republican win, there’s no doubt that some of these predictions have been reigned in a bit. At one point analysts were predicting that most online title loans and personal loans would be eliminated all together. Industry experts felt the restrictions would be so strong. They saw many of the largest auto companies would back out of future lending. Instead we saw the Government try to curb payday loans, installment loans and pink slip financing. These restrictions are supposed to limit the number of loans that any one person can have. Even if a lender has competitive rates they will still need to provide a set loan amount. The rules are also in place to limit the amount that any specific online title lender can charge. It remains to be seen if these restrictions will stick. The CFPB is currently in turmoil and we have no way of knowing were things are headed over the next few months. As always, specific states and localities continue to bring on rules to enforce online loans in their locations. Check with your local city or state government sites to get the latest updates on your specific region. One new law on the state level threatens to reign in high interest lenders but it’s unknown what the final effect will be. Assembly Bill 539 in California will cap interest rates at 36% for most title loans issued in the state. This new law only recently went into affect so it will take some time to determine a final outcome.
We have begun to see the effect that technology has when it comes to online lending. It seems that car title loans have been a bit behind payday and installment loans. When it comes to efficiency but that seems to be changing. In the past, it could take days and weeks to see approval for an equity loan. The loan application had to be verified in person. This meant there was a large amount of manual work and the paperwork can take hours to review. As long as someone has a clear title without a lien, the process is fast and easy. Additionally each car requires a manual verification and proof of income that needs to show verification. We see many examples where it can take a week to get a vehicle inspection. Remember, many applicants apply online hoping to get money within 24 hours. Unfortunately, it takes much longer than that. You need to line up an inspection and make sure your schedule matches that of the car equity loan company. Another aspect where we see change is the approval process. Whereas it can take days to underwrite a loan application, that time amount is now down to a matter of hours. We can attribute this increase to many reasons. There are now more companies funding online loans. This means they need to compete with each other and many are going to promise quicker approvals and underwriting. Another factor is the fact that many title documents and pink slips are now accessible online. Instead of having to go to your local DMV, you can now access this information online in a few minutes. Many Department of Motor Vehicle sites allow you to access this information through their websites. The State of California DMV has a fast and easy online portal that will give access to all the necessary registration documents.
The biggest change we see is the addition of new finance companies that feature title loans online. Going back 5-10 years it seems that many companies wanted to leave the industry. Many lenders were reducing the amount of states they provide online loans in. Now we see some of those same companies expanding their online reach. Some of the large firms have recently begun lending in states like California, Texas and Ohio. This would have been unheard of a few years ago. New companies are coming on board to provide online title loans in many specific states. Last week we got word that a credit services organization was going to provide pink slip loans in Florida and Georgia. It remains to be seen what kind of effect these changes will have on the online lending environment. There promises to be new further regulatory changes throughout the year. Even though we see increases in efficiency of approving applicants, we have no way of knowing if this will lead to more loan defaults. This would be like what happened with the mortgage crisis. Increases in efficiency and lending standards led to far more approvals. But many defaults hurt the lending industry for years. At CarTitleLoanLenders we promise to stay on top of the changes that occur. We’ll continue to update this post in our blog section throughout the year if any updates come about.