California Car Title Loan Laws
Key Regulations for Subprime Lenders in California (Post-AB 2953 Enactment) Car Title Loans (Regulated under the California Financing Law – CFL) Car title loans are nonpurchase money loans with a bona fide principal amount of $2,500 or greater, where the lender obtains a security interest in a motor vehicle. The following regulations now apply, incorporating the changes from AB 2953: Interest Rate Cap Current Regulation (Post-AB 2953): CFL licensees are prohibited from charging more than 3% per month (equivalent to 36% APR) on the unpaid principal balance of title loans of $2,500 or greater. This cap applies uniformly to all title loans, including those above $10,000. Administrative Fee Cap For loans above $2,500, administrative fees are capped at $75 (Section 22305). Loan Term Restrictions For loans under $5,000, the maximum loan term is 60 months plus 15 days (Section 22334). Payment Structure For loans under $10,000, payments must be structured in equal, periodic installments (Section 22307). Collateral Restrictions Secured by a motor vehicle (personal property); prohibition on requiring real property as collateral for loans under $5,000 (Section 22330). Delinquency Fees For loans under $5,000, delinquency fees are capped at: $10 for loans 10 or more days delinquent. $15 for loans 15 or more days delinquent (Section 22320.5). Additional Restrictions For Loans Under $5,000: Prohibition on compound interest or charges (Section 22309). Requirement to prominently display a schedule of charges to borrowers (Section 22325). Prohibition on splitting loans with other CFL licensees (Section 22327). For Loans Under $10,000: Limits on conducting other business activities at the loan premises (Section 22154). Standards for selling insurance to borrowers (Sections 22313 and 22314). For Loans of $10,000 or Above: While general CFL restrictions are minimal, the 36% APR cap now applies to title loans in this range due to AB 2953. Pilot Program for Small Dollar Loans (CFL Sections 22365 et seq.) Applies to loans between $300 and $2,500 (less relevant for typical title loans above $2,500). Interest rates are capped at approximately 36%: Specifically, the lesser of 36% or 32.75% plus the prime rate for up to $1,000. 35% or 28.75% plus the prime rate for amounts above $1,000. Includes underwriting requirements (e.g., borrower’s debt service must not exceed 50% of gross monthly income). Context and Implications of AB 2953 Enactment Uniform APR Cap for Title Loans The 36% APR cap now applies to all title loans of $2,500 or greater, aligning California with 25 other states and the District of Columbia that have similar caps or prohibitions on title lending. This cap incentivizes lenders to conduct ability-to-repay underwriting to reduce defaults and repossessions, as high default rates are unsustainable under the capped rates. Impact on Business Practices Lenders must adjust their underwriting standards to ensure borrowers can repay loans without relying on high APRs to offset default risks. The cap will reduce the availability of title loans for higher-risk borrowers, potentially shifting demand to other credit products or unregulated lenders. This overview reflects the current regulatory environment for subprime lenders in California following the enactment of AB 2953. It highlights the new 36% APR cap for car title loans while maintaining the existing payday loan regulations under the DDTL. Questions? Need help? Introductions? Reach out to Jer at : Jer@theBusinessOfLending.com 4-WAYS I CAN HELP YOU! Grab a copy of our “bible:” Learn More Brainstorm: Learn More The Business of Lending: Learn More Free Bi-Monthly Newsletter: Learn More Place your Money Lending Store on your borrower’s phone. Learn More
Breaking Free: A New Dawn for Consumer Lending
HOW TO LOAN MONEY TO THE MASSES without getting your butt handed to you The Winds of Change Hold onto your lending portfolios because a regulatory tornado just swept through Washington! Scott Bessent has taken the helm at the CFPB, and folks, this isn’t just another bureaucratic shuffle – it’s the financial equivalent of a prison break for our industry! Picture this: The ink on Bessent’s appointment papers was barely dry when he fired off an email that sent shockwaves through the regulatory landscape. Like a master conductor stopping an orchestra mid-performance, Bessent directed CFPB staff to halt ALL rulemaking activities. Those pending regulations that had compliance officers stockpiling antacids? Suspended! The enforcement actions that were hanging over the industry like storm clouds? Frozen in their tracks! Even the CFPB’s research papers and public communications – poof! – all placed on immediate pause. This isn’t just a change of guard; it’s a complete reset of the regulatory chess board. In one bold move, our new Acting Director has pressed the pause button on the entire regulatory machine. Those handcuffs that have been limiting your lending innovation? Consider them unlocked. That regulatory sword of Damocles hanging over your business plans? It just got a whole lot lighter! What This Means for Your Business Let’s break down this golden opportunity: Freedom to Innovate: Remember all those creative lending solutions you had to shelve because of regulatory red tape? It’s time to dust them off! The new CFPB leadership is signaling a clear shift toward market-driven solutions. Expanded Market Access: With 54 million “credit invisible” consumers out there (yes, that’s a real CFPB stat!), we’re looking at an ocean of opportunity. These aren’t just numbers – they’re real people who need our services. Streamlined Operations: Say goodbye to those redundant compliance procedures that were eating into your profits. The new direction suggests a more business-friendly approach to oversight. The Smart Play: Think Local, Act Local Here’s where it gets interesting – and where my original take comes in. While everyone’s celebrating the federal shift, keep your eye on the state level. Those state regulators? They’re like the substitute teachers who try extra hard to maintain order when the principal’s away. Smart operators will: Build strong relationships with state regulators Create state-specific compliance frameworks Document everything (and I mean everything) Stay ahead of state-level policy shifts The Secret Sauce: Consumer Education Here’s my million-dollar insight: The best defense against future regulatory swings is an educated customer base. While some see financial literacy as a burden, I see it as our industry’s bulletproof vest. Consider this: Every customer who fully understands their loan terms is a walking advertisement for responsible lending. Every successful repayment story is ammunition against our critics. Your Action Plan Review Your Product Suite: What innovative lending products have you been holding back? Now’s the time to revisit them. Update Your Marketing: Emphasize education and transparency. Show the world we’re not just lenders – we’re financial partners. Strengthen Your Documentation: Yes, oversight is reducing, but smart lenders keep receipts! The Bottom Line �� This regulatory shift isn’t just about loosening restrictions – it’s about proving that our industry can thrive while serving consumers responsibly. The real winners won’t be those who push the boundaries furthest but those who use this freedom to innovate while maintaining ethical standards. Remember: 60%+ of Americans live paycheck to paycheck. They’re not just statistics – they’re our potential customers, and they need access to credit more than ever. Ready to Seize the Moment? The regulatory gates are opening, but success isn’t automatic. You need a strategy that balances opportunity with responsibility. Want to learn more about navigating this new landscape? Let’s connect and explore how your lending business can thrive in this new era. P.S. This isn’t just change – it’s opportunity knocking. Are you ready to answer? Schedule a Free 15 Minute Brainstorming Session > You own storefront locations? Get found on your customer’s phone! Get chosen! Fund more loans. Free via your Google Business Profile! >36% APR loan products NOT a PROBLEM! Learn More about getting found by borrowers nearby 4-WAYS I CAN HELP YOU! Grab a copy of our “bible:” Learn More Brainstorm: Learn More The Business of Lending: Learn More Free Bi-Monthly Newsletter: Learn More Google Local. Your business on your borrower’s phone. Learn More You want to put capital to work in the subprime lending industry? Email
Car TItle Loan P & L
Category Amount (USD) Percentage of Income Income – Fee Income (Title Loans) 3,045,222.98 90.1% – Fee Income (Payday Loans) 333,056.59 9.9% – NSF Fee Income 25.00 0.0% – Income, Addison & Misc. 401.20 0.0% – Refunds and Allowances -468.02 -0.0% Total Income 3,378,237.75 100.0% Expenses – Advertising 16,091.91 0.5% – Merchant Fees 32,385.69 1.0% – Incentive Bonuses 940.00 0.0% – Repo Fees 85,458.74 2.5% – Licenses & Fees 2,544.25 0.1% – Mileage Reimbursements 26,949.73 0.8% – Office Supplies 34,073.42 1.0% – Referral Fees 1,017.00 0.0% – Rent & Occupancy 360,869.54 10.7% – Repairs & Maintenance 27,514.80 0.8% – Grounds Maintenance 2,850.00 0.1% – Cleaning, Sanitation & Trash 3,688.43 0.1% – Salaries, Operations 723,289.94 21.4% – Employers FICA & ML Taxes 56,826.75 1.7% – Security Monitoring Services 11,073.45 0.3% – Telephone 33,712.87 1.0% – Utilities 54,180.83 1.6% – Internet Costs 1,535.39 0.0% – Write-Offs 54,646.09 1.6% – Property Taxes – Stores 1,740.76 0.1% – Title Fees, Etc 11.75 0.0% Total Operations Costs 1,551,905.58 45.9% Other Expenses – Automobile Expense 10,680.42 0.3% Total Expenses 2,153,471.44 63.7% Profitability – Net Ordinary Income 1,224,766.31 36.3% Total Net Income 1,224,766.31 36.3%
Subprime Lending Seasonality: When Credit-Challenged Consumers Seek Funding
Seasonality of Subprime Lender Transactions Timing is everything in lending, especially when serving credit-challenged borrowers. Understanding the rhythms of demand—when needs spike and when they settle, can mean the difference between missed opportunities and maximized profits. The table below captures the seasonality of subprime borrower transactions, revealing the patterns that drive their financial behavior. Armed with these insights, subprime lenders can anticipate demand, tailor their offerings, and stay one step ahead in meeting the needs of their customers at just the right moment. Trans Union Data Every great business decision starts with clarity. In the world of subprime lending, where challenges and opportunities collide, understanding the landscape is the key to thriving. The table below distills essential insights and actionable strategies, offering a clear path for lenders who serve credit-challenged consumers. Whether navigating rising delinquencies, regulatory constraints, or shifting borrower behavior, this analysis equips you with the tools to turn obstacles into opportunities and ensure profitability in a competitive market. Subprime Lending: Insights and Strategies for Profitable Growth Subprime Lending Analysis Category Observations/Analysis Strategies for Subprime Lenders Delinquency Trends 60+ DPDs increased for UPLs for the 4th consecutive month. Bankcard 90+ DPDs are flat, but balances increased (+0.6% MoM). Implement real-time borrower analytics to detect early warning signs of default. Adjust underwriting criteria seasonally. Loan Origination Subprime originations fell across multiple channels: fintechs (-11.6% MoM), credit unions (-22.1% MoM). Finance companies saw YoY increases in subprime originations (+34.3%). Diversify portfolio with loan products targeting near-prime borrowers. Target secured loans like auto title loans to mitigate risks. Market Share Finance companies lead UPL balances (29%), followed by fintechs (27.8%). Subprime borrowers are migrating toward nontraditional lenders. Leverage digital platforms to improve accessibility and capture underserved demographics. Offer mobile-first experiences for onboarding. Rising Borrower Stress Subprime delinquencies rising due to inflation, high cost of living, and increased bankcard balances. Borrowers prioritize secured debts. Provide financial literacy resources to educate borrowers. Introduce loan consolidation programs. Risk Management Default risks rising for subprime loans due to macroeconomic pressures. Use behavioral data alongside credit scores for advanced risk profiling. Automate collections with predictive analytics. Seasonality Tax season presents high demand for liquidity among subprime consumers. End-of-year obligations drive borrowing needs. Launch tax refund anticipation loans and targeted campaigns. Offer flexible repayment plans. Regulatory Constraints APR caps limit profitability, especially in states with 36% caps. Restrictive policies create “loan deserts.” Use compliant models like multi-state licensing or sovereign nation partnerships. Expand online lending in regulated markets. Operational Efficiency Rising delinquencies increase operational burden. Adopt off-the-shelf loan management software. Optimize collections processes. Competitive Environment Lenders shifting focus to prime and near-prime borrowers, increasing competition. Develop customized offers for near-prime borrowers. Monitor competitors and adjust product pricing. Definitions: DPDs = Days Past Due MoM = Month Over Month UPLs = Unsecured Personal Loans Inspired by: Cole Gottlieb and Tansunion Types of Loans Popular Among Credit-Challenged Consumers Types of Loans Popular Among Credit-Challenged Consumers Loan Type Description Potential Seasonality Personal loans for bad credit Offered by online lenders specifically for borrowers with low credit scores. Demand will increase during periods of economic uncertainty or when consumers face unexpected expenses. Family loans Borrowing from family members or friends. More prevalent during times of financial hardship, such as job loss or medical emergencies. Buy now, pay later loans Short-term financing options that allow consumers to make purchases and pay for them in installments. Most popular during the holiday season and other periods of increased consumer spending. Cash advance apps Mobile apps that provide small cash advances, often with fewer fees than payday loans. See Dave.com Demand is consistent throughout the year, with spikes during emergencies or unexpected expenses. Payday loans Short-term, high-interest loans due on the borrower’s next payday, with a loan length of two to four weeks. Usage increases during periods of financial strain or when consumers have limited access to other credit options. Credit builder loans Designed to help improve credit scores for those with no or limited credit history. Demand is steady throughout the year, as consumers seek to establish or rebuild their credit. Debt consolidation loans Used to combine multiple debts into one loan with a potentially lower interest rate. Demand increases during tax refund season or when consumers experience a change in financial circumstances. Car title loans A type of secured loan where borrowers use their vehicle title as collateral. See AutomobilePawn.com Demand is higher during periods of economic hardship or when consumers need quick access to cash. Installment loans Loans that are repaid over a set period of time with fixed payments. Demand influenced by factors such as interest rates, loan terms, and consumer confidence. Subprime Lending Analysis and Strategies Key Takeaways from the Data: Subprime Consumer Statistics and Impact: Over 50% of U.S. households live paycheck-to-paycheck, and about 40% of households earning $100,000 or more do so. Nearly one in three U.S. adults are subprime borrowers (credit scores under 620), with 40% unable to access $400 in an emergency. Bankruptcy filings have risen consistently for 19 months, driven by high credit card defaults, inflation, and aggressive debt collection tactics. In Illinois, a 36% APR cap resulted in a 44% reduction in loans to subprime borrowers, with consumers turning to illegal or informal sources for credit. Economic and Policy Context: Regulatory measures like the Military Lending Act’s 36% cap have unintentionally created “credit deserts,” where consumers lose access to vital credit products. High inflation and increased cost of living have amplified consumer financial stress, increasing demand for small-dollar, short-term loans. Impact on Subprime Lenders: The growing demand for emergency small-dollar loans represents an opportunity for subprime lenders but is constrained by regulatory restrictions, such as APR caps and increasing borrower defaults. The seasonality of lending demand, particularly around tax refunds and year-end obligations, presents a critical period for maximizing revenue. Stricter regulations reduce profitability by increasing compliance costs and limiting flexibility in pricing loans. Strategies for Ensuring Profitability for Subprime Lenders: Regulatory Navigation: Employ legal models such as sovereign nation partnerships or multi-state compliance
The Untapped $4.2 Billion Title Loan Market: Who’s Desperate for Fast Cash?!
Why Subprime Lending Isn’t the Villain You Think It Is Lend money to subprime consumers who need quick access to cash but lack traditional credit options. With car titles as collateral, you can offer life-saving loans for emergencies like car repairs or medical bills, while ensuring your investments are secured. It’s a win-win opportunity: help consumers avoid NSF fees, keep their jobs, fill a prescription… while simultaneously generating significant profits with high APR loans to offset your risk. Ready to capitalize on this lucrative market? Discover the ultimate guide! Invest in our 500+ page eBook, packed with step-by-step instructions to start and grow your title loan, payday loan, installment loan business. Don’t miss out! Grab your copy now! > Financially Challenged Subprime Consumers Who Need Title Loans for Vehicle Repairs Landscapers and Lawn Care Specialists Rely on trucks for transporting equipment, making them vulnerable to vehicle breakdowns that could halt their income. Food Truck Owners and Mobile Vendors Their livelihood depends on a working vehicle to reach customers; repairs can be costly. Delivery Drivers (Gig Workers: DoorDash, UberEats, Instacart) Their income depends on keeping their vehicles in working order, and they often live paycheck to paycheck. Rideshare Drivers (Uber, Lyft, etc.) Must maintain reliable cars for work but may not have funds for unexpected repairs. Construction Workers and Contractors Use trucks and vans to transport tools and materials; vehicle breakdowns directly impact their ability to work. Exterminators and Pest Control Specialists Rely on service vehicles to transport equipment and chemicals to reach client locations. House Cleaners and Janitorial Service Providers Need their cars or vans to travel between job sites but may not have savings for repairs. Pool Service and Maintenance Companies Must travel to customers’ homes with chemicals and equipment, requiring a functioning vehicle. Small Business Owners (Mobile Car Wash, Mobile Pet Groomers) Depend on their mobile businesses but often struggle with sudden vehicle maintenance costs. Daycare Providers and Nannies Often need vehicles to transport children and manage pick-ups and drop-offs. Independent Plumbers and Electricians Cannot afford to miss work due to vehicle failure, as they rely on vans to carry tools and materials. Home Health Aides and Caregivers Use personal vehicles to travel between homes for caregiving duties and often live on tight budgets. Personal Trainers (Home Visits) Need vehicles to reach clients’ homes or fitness centers, and may not have cash reserves for repairs. Farmers and Agricultural Workers Often rely on trucks for transporting goods or equipment; a breakdown can disrupt operations. Handyman and Repair Services Independent workers need trucks or vans to reach job sites and carry equipment. Emergency On-Call Workers (Tow Truck Operators, Emergency Locksmiths) Must have reliable transportation for urgent calls, often working in low-margin, unpredictable industries. Event Planners and Caterers (Mobile Services) Rely on vehicles to transport food, decor, and supplies to events; a breakdown can jeopardize their business. Taxi Cab Operators (Especially Independent Drivers) May not have access to large cash reserves, and a vehicle issue directly affects their income. Door-to-Door Sales Representatives Need vehicles to reach various neighborhoods; a broken vehicle means a loss in potential sales. Home Improvement Contractors (Roofers, Painters, etc.) Require trucks and vans to transport materials, and unexpected breakdowns are a significant cost. Courier Services (Local Delivery Drivers) Often work independently with personal vehicles, and a repair cost could temporarily force them out of work. Mobile Repair Technicians (Appliance, IT Repairs) Depend on functional vehicles to visit customers and provide repair services. Scrap Metal Collectors and Junk Removal Services Rely on vans or trucks for hauling scrap and junk; vehicle downtime can mean missed income opportunities. Moving Companies (Small Independent Operators) Use trucks to move household goods and face potential income loss when their vehicles are out of service. Seasonal Workers (Snow Removal, Holiday Light Installers) Have short, intense working seasons where vehicle downtime could drastically affect their earnings. Rural Postal Carriers (Independent Contractors) Depend on personal vehicles to deliver mail in rural areas; repairs are urgent but funds may be limited. Tour Guides (Who Provide Transportation) Use personal vehicles for driving tourists, but may not have savings to cover repairs in off-season periods. Pet Sitters and Dog Walkers Often travel between clients’ homes and need a working vehicle to maintain their income flow. Field Marketing Representatives Travel to various retail locations or events and rely on personal vehicles for their job. Traveling Salespeople (Business-to-Business Sales) Use their vehicles to visit multiple clients daily; without a working vehicle, their sales efforts stall. Seasonal Agricultural Workers (Harvesters, Pickers) May travel long distances for work and rely on personal vehicles; repairs are often beyond their financial reach. Freelance Photographers (Event and Location-Based) Depend on cars to transport photography equipment to job sites, but often work on tight budgets. Musicians (Touring or Gig Performers) Need vehicles to transport equipment between venues, and breakdowns can result in missed gigs. Independent Contractors (IT, Consulting Services) Use personal vehicles for client visits but may not have access to funds for emergency repairs. Seasonal Workers in Amusement Parks or Fairs Often have limited work periods and may lack access to credit for vehicle repairs during off-season. Mobile Barbers or Hairstylists Travel to clients’ homes and rely on their cars for their livelihood but may not have emergency funds. Furniture Movers and Independent Moving Laborers Use trucks or vans to move furniture and rely heavily on working vehicles to sustain their business. Artists and Craftspeople (Who Sell at Markets or Events) Use personal vehicles to transport products to fairs, art shows, or markets but may not have funds for repairs. Freelance Videographers and Cinematographers Travel to multiple locations for shoots and need reliable transportation for both work and equipment. Disaster Response Workers (Independent Contractors) Need to be mobile to respond to emergencies, and a vehicle issue could prevent them from earning. Low-Income Parents (Struggling to Commute for Work/Childcare) Need their cars to juggle work, daycare, and school but often lack emergency savings for repairs. Weekend or Part-Time Workers (Second Job Workers) Use their vehicles
How to Start a Car Title Loan Business
How to Get Your Subprime Car Title Loan Google My Business Listing
California AB539 Solutions for Lenders
<36%: Do you want to remain in business? We offer a turnkey program that will enable you to start/continue offering <36% APR title loans while maintaining a 200%+ ROI on your portfolio. These solutions for continuing to offer <36% APR collateralized loan products “work” in all states! 1 in 3 Californians Struggle! Nearly 1 in 3 Californians have a subprime credit score or no credit score at all,6 meaning they likely struggle to access credit through a traditional bank or credit union. Here’s the New York Fed Study: Click We have 2 Solutions to choose for all States: Offer CPI: “Collateral Protection Insurance” coverage to your title loan/collateralized borrowers. OR Collaborate with a federally recognized Native American Indian tribe. LeaningRockFinance.com ] #consultingservices #ab539 #tribelending #smalldollarloans California AB539: The law became effective January, 1st, 2020. California Department of Business Oversight Law: Click Here CDBO Solutions for <36% APR Lenders We’ve reviewed hundreds of existing California CFL consumer contracts. The majority already reference the forced-placement of collateral protection insurance to protect the lienholder from a catastrophic loss. If your contracts do not already have this language, allow our 25-year experienced Team to provide your contract language free of charge. Additionally, we offer a 100% turnkey package enabling your title loan company – in any State – to offer <36% APR collateralized loan products while still earning superior ROI on your business investment. Simply email: TrihouseConsulting@gmail.com to schedule an exploration. Native American Indian Tribe Collaborations Additionally, if your offering consumer personal loans at ANY APR, we provide collaborations with Native American Indian tribes. This “works” just like the “bank model.” Visit LeaningRockFinance.com for an introduction.
How to Start an Alabama Car Title Loan Company
Opening a car title loan business in Alabama is easy, and can be very profitable. Alabama has specific licensing, regulatory and compliance statutes in place. You can access all the Alabama car title loan, pawn, small-dollar loan and payday loan license applications here…
How to Start a Car Title Loan Business
LA’s billionaire king of subprime auto lending Car title loan lenders get a bad rap from the majority of society because most people are unable to put themselves in their “brother’s shoes.” Here is an example of a real-world car title loan lender who enables average folks who need a car in order to get to work, pick up their kids… Setting the scene Every weekday around 6 a.m. Don Hankey, 76, arrives by chauffeured car at his office near Hancock Park. Hankey started in the auto business nearly 50 years ago, when he took over his father’s car dealership at Vermont and Beverly. That business eventually grew into The Hankey Group, a collection of seven mostly car-related companies: Insurance, rentals, technology, but also real estate. The real moneymaker of the group, however, is Westlake Financial Services, a huge subprime auto lender that does business throughout the U.S., Mexico, India and the Philippines. On a recent morning at 7 a.m., the company had already approved 286 deals. By the end of the day, Hankey said, he expected that number to hit 20,000. Interest rates for these loans can reach as high as 30% (versus the national average rate of about 4% on a 60-month loan). “We try not to say no,” said Hankey. “We just try to make it impossible to buy the deal,” either through high-interest rates or demanding more money down. On accusations of predatory lending: “Let’s say you have somebody with bad credit, so they either have to pay 18% interest or not get a car at all. Are we better off just not giving them a car? I think they need a car. Maybe it provides a job for them that they wouldn’t otherwise have. There’s good and there’s bad to it, but I think that I think the good [out]weighs the bad.” On the origins of the subprime auto lending boom: “You know, people say they’re going to pay their house payment first. And then a funny thing happened in 2008, 2009 [during the mortgage meltdown] … Many people let their house go, but they needed that car, and they couldn’t go to work without the car. They left their house…and kept their car payments current.” That means Hankey, and other lenders can make money two ways: From their borrowers paying back those high-interest loans, and by selling those loans off to Wall Street, where demand increased post-recession. “People buy that credit. They were very concerned during the Great Recession that these things would default. But what happened is that almost all of them got paid in full, and you saw the defaults on real estate. People go out of their way to hold onto their car in a bad period of time.” As long as people need cars to get to work, Hankey says, he’s not worried about a massive wave of defaults like what happened in the housing market a decade ago. Originally Posted here: “Subprime Auto Lending.”