State laws govern lenders' rights when borrowers default on their loans. In Hawaii, the Code of Financial Institutions in the Hawaii Revised Statutes establishes the respective rights and duties between lenders and borrowers. The Hawaii Revised Statutes limits the types of loans lenders can enter into with their customers and the fees they can charge.
Payday Loans
Payday loans are legal in Hawaii; however, payday loan lenders must comply with the state's payday loan laws. Payday loan lenders can only extend their loans for up to 32 days and cannot charge more than 15 percent in interest. Payday loan lenders cannot enter into more than one loan at one time with individual borrowers, and they may not enter into successive payday loans with individual borrowers. Under Hawaii law, payday loan lenders can pursue collections against borrowers in default and obtain judgments allowing them to levy and garnish bank accounts.
Personal Loans
The Hawaii Revised Statutes does not prohibit personal loan lenders from repossessing personal property used as loan collateral. Repossession agencies are not required to request court orders or permission before they can legally repossess property. Repossession agencies cannot breach the peace during their repossession attempts. Under Hawaii law, repossession agencies can sue borrowers who attempt to stop their repossession attempts and can recover damages, attorneys' fees and court costs. Creditors can also sue debtors in Hawaii by filing replevin suits or suits to recover collateral.
Rules for Repossession Agencies
After personal loan lenders repossess property, repossession agencies can keep their repossessed collateral if debtors have paid less than 60 percent of the face value of their repossessed items or 60 percent of their loans. If lenders can legally keep their property, they must provide debtors with written notice of their intent to retain their collateral, and debtors have 21 days to contest their repossessions. After creditors conduct their sales, they must return any surplus to debtors; if their sales are less than their remaining loan balance, they can file deficiency judgments against debtors. Borrowers have a right to redeem their property until the sale date by paying off the entire deficiency, damages and fees.
Loans and Defaults
Hawaii banks and financial service institutions cannot charge more than $20 in insufficient funds fees. Borrowers with insufficient funds charges cannot be considered to have defaulted on their loans. Banks are further prohibited from deducting insufficient funds fees from borrowers' loan balances, and they must bill their customers separately for those fees.
Lenders can pursue writs of execution against personal and real property used as collateral by borrowers. Once they obtain judgments to collect their collateral, Hawaii law allows them to sell their assets through judicial sales and auctions after they publish notice of those sales in local newspapers.
Considerations
Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.
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