In Colorado, the General Assembly passed a bill limiting the amount of interest title loan lenders can charge borrowers. The Legislature amended the Colorado Uniform Consumer Credit Code in 2000 to regulate deferred deposit loan and small-loan lenders. The new amendments placed a cap on the interest rates title-loan lenders can charge and clarified the Colorado attorney general's position on the title-loan lending practice.
Colorado Law
The Colorado attorney general's office considers title-loan lenders different than payday lenders. Payday lenders provide short-term, high-interest loans to consumers in exchange for their right to cash their paychecks if they are unable to pay their loans by the next payday. Similar to payday loans, title loans are often at high interest rates for very short durations. However, under Colorado law, payday lenders are not subject to the state's usury laws; title-loan lenders are subject to the state's usury laws and loan cap of 36 percent as of 2011.
Notice Law
The Colorado attorney general's formal position is that title-loan lending practices are against Colorado's lending laws, but as of 2011, the Colorado Legislature has not made it illegal for title lenders to conduct business within the state. Title-loan lenders are subject to the Colorado Uniform Consumer Credit Code. This applies to transactions where borrowers give lenders a security interest or collateral in exchange for the loan. If the borrower defaults on her loan, the lender must give her written notice of default.
Recourse
Under the Colorado Uniform Consumer Credit Code, a lender must send a written notice of late payment to a borrower who is at least 10 days delinquent in his loan payments. A title lender's notice must tell the borrower that he has 20 days to cure his default from the notice date. If he pays within 20 days, the title loan lender cannot repossess his vehicle or accelerate payments. Lenders do not have to provide notice more than once annually. If the borrower has not paid after 20 days, the lender can repossess his vehicle and sell it. After the sale, the lender can sue the borrower for any deficiency.
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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