Prior to 2000, the average interest rate on car title loans in Florida exceeded 200% per year. In response to this, the Florida legislature passed the Florida Title Loan Act in 2000. The goal of the Act is to protect consumers in financial straits who take out car title or other types of title loans. It places limits on interest rates that title loan lenders can charge, requires a written contract containing certain information, and provides some other protections.
Title loans are short term, high interest loans with little risk to the lender and substantial risk to the borrower. Although they are not consumer-friendly, title loans remain popular with consumers because they don't require a credit check or proof of income.
blurbblurb(For more articles about consumer protection laws in Florida, visit out Florida Debt Management and Consumer Protection Center.)
What Is a Title Loan?
A title loan is a cash loan to the owner of titled personal property (usually a motor vehicle) where the title to the property serves as security for repayment of the loan. The loan is a short term, high interest loan. If you don’t pay on time, your property is repossessed and sold to satisfy the obligation. There is often minimal risk to the lender as the amount of the loan given is usually far less than the value of the vehicle.
Florida Laws Governing Title Loans
There are two Florida laws that govern title loans. The law that is applicable to your transaction depends on which law the lender is licensed under.
Florida Statute 537. The law passed in 2000, Florida Statute 537, is thought to provide more protection for the consumer because it has more specific restrictions on repossession, sale, and extra charges imposed by the lender.
Florida Statute 516. Many lenders, however, are licensed under Florida Statute 516, which governs consumer lending generally and is not restricted to title loans. While this statute provides consumer protections, it is less specific and does not set out the particular requirements for compliance.
Unless specified, the below laws apply to lenders licensed under either Florida Statue 537 or 516.
Property That Can Be Used as Security for Title Loans in Florida
In Florida any titled personal property, other than a mobile home which serves as the borrower's primary residence, can be used for a title loan.
Agreement Must Be in Writing
Florida title loan agreements must be in writing under both statutes. Under 537, the agreement must include
- the make, model, and year of the titled property you are giving as security for the loan
- the vehicle identification number or other comparable identification number, along with the license plate number, if applicable
- your name, residential address, date of birth, physical description, and social security number
- the date the agreement is signed by you and the lender
- the type of personal identification you provided and the identification number
- the amount financed (the amount you received)
- the maturity date, calculated as the date which is thirty days after the date you sign the title loan agreement
- the finance charge (total amount payable as interest on the maturity date)
- the total amount of all payments, which is the amount you must pay to reclaim the title on the maturity date (the amount financed plus the finance charge)
- the annual percentage rate (interest rate calculated on a yearly basis)
- the name and physical address of the title loan office
- the name and address of the Department of Financial Services and a telephone number for complaints
- legal notice that failure to pay the amounts due may result in the lender taking possession of the vehicle and selling it to satisfy the obligation, with the borrower being entitled only to any excess proceeds, and
- your representation that the property is not stolen, has no liens or encumbrances (is fully paid), you are authorized to enter into the agreement and your promise not to apply for a duplicate title.
The title lender must provide you with an exact copy of the fully executed (signed by both parties) agreement at the time of the transaction.
Limits on Interest Rates for Florida Title Loans
The maximum interest rate that can be charged on title loans in Florida is:
- 30% on the first $2,000 borrowed
- 25% on the amounts over $2,000 up to $3,000, and
- 18% on any amounts over $3,000.
Interest must be calculated as annual simple interest and not compounded. If a lender intentionally collects interest over the allowed percentage rate, the title loan agreement is voided and the lender forfeits any right to collect any amounts, including principal, owed on the loan.
Extensions of the 30-Day Loan Term
In Florida, the term is limited to 30 days under Florida Statute 537 but may be extended if both parties agree in writing. The loan term can be extended for one or more 30-day periods. The interest rate charged for any extension may not exceed the interest rate in the original agreement. No interest due or owing on the original agreement or prior extensions may be rolled into principal for the purposes of an extension agreement.
Repossession and Sale
The lender may take possession of the titled property if you fail to pay the amount due at maturity or any extensions and fail to make a payment within the 30 days thereafter.
Borrower rights. Florida Statute 537 details rights of the borrower and obligations of the lender in connection with repossession and sale. The lender must:
- provide you with the opportunity to voluntarily surrender the titled property at a convenient place, date, and time prior to repossession using a licensed repossession agent
- provide you with an opportunity to remove your personal belongings from the titled property without charge or additional cost to you
- sell the property through a licensed motor vehicle dealer
- notify you of the date, time, and place of the sale at least ten days prior to the sale date
- provide you with a written accounting of all amounts due, including principal, interest through the date of repossession and the reasonable costs associated with taking possession of the property, preparing for sale, and the actual sale (but not storage fees), and
- pay any excess sale proceeds to you within 30 days after the sale date.
Your Right to Redeem Prior to Sale or to Bid at the Sale
You have the legal right to redeem the titled property by paying the total amount due by money order or cashier’s check at any time prior to sale. You also have the right to bid at the sale.
Prohibited Actions by Title Loan Lenders
Under Florida Statute 537, a title loan lender doing business in Florida is prohibited by law from:
- entering into a loan agreement with anyone under 18 years of age
- collecting any deficiency balance from you after the property is sold
- entering into a loan agreement with anyone who the lender knows or suspects to be under the influence of drugs or alcohol
- selling or charging for insurance
- refusing to accept partial payments
- charging a prepayment penalty, and
- engaging in the business of selling new or used motor vehicles or parts.