Our Best Practices

 

Auto Equity Loans Best Practices 

The Ohio Consumer Lenders Association (“OCLA”) is an industry trade group whose members include both consumer finance companies (“Lenders”) that make loans to consumers as well as third-party Credit Services Organizations (“CSO’s”) that assist consumers in applying for such loans.  Some of the loans made by the Lenders require that the consumer pledge a security interest in the consumer’s motor vehicle as collateral for the loan.  These loans are referred to herein as Auto Equity Loans (AEL’s).  Members of the OCLA that are involved in the making of AEL’s, whether as a Lender or a CSO, have agreed to comply with the following best practices.

  •  Full Disclosure – Both the credit services contract between the CSO and the customer, and the loan agreement between the Lender and the customer will fully detail the terms of each agreement including the interest and/or fees charged by each business.  Lenders will fully comply with the Federal Truth and Lending Act and ensure that all Finance Charges are disclosed both as a dollar amount and as an Annual Percentage Rate (“APR”).
  •  Rates and Fees – CSOs and Lenders will not charge interest or fees in excess of the maximum rates permitted by Ohio law. A customer will have the ability to pay an AEL loan in full at any time without penalty. Once a loan is paid in full, the title will be returned to the customer and the lien released in a timely manner.
  •  Compliance – CSOs and Lenders will comply with all applicable laws and regulations and will hold all required Ohio licenses.
  •  Military Lending – While no CSO or Lender will unlawfully discriminate against any member of the U.S. Military, any Lender that makes a loan to active duty members of the Military or members of their immediate families, will comply with the letter and spirit of those laws and regulations relating to loans made to the military including, but not limited to, the John Warner National Defense Authorization Act and the Talent Amendment thereto.
  • Truthful Advertising – CSOs and Lenders will not advertise credit services in any false, misleading, or deceptive manner, and will promote only the responsible use of financial products and services.
  • Refinancing’s – CSOs and Lenders will encourage customers to limit refinancing’s of their AEL.  For single payment loans, where it does not cause a financial hardship to customers, CSO’s and Lenders will recommend a principal reduction if a customer chooses to refinance the loan.  CSO’s and Lenders will offer a refinancing whenever possible rather than potentially pursing an action against the security of the loan.
  • Encourage Consumer Responsibility– CSOs and Lenders will implement procedures to inform consumers of the intended use of financial products and services which they offer.  These procedures will include the placement of a “Customer Notice” on or with the documents presented to the consumer at the closing of an AEL. The “Customer Notice” will be in bold point font and will include at a minimum the following statements:
    1. THIS IS A LOAN SECURED BY YOUR MOTOR VEHICLE. IT ALLOWS YOU TO RECEIVE LOAN PROCEEDS TO MEET YOUR CASH NEEDS.  THERE MAYBE OTHER FINANCIAL OPTIONS THAT MEET YOUR FINANICAL NEEDS. YOU SHOULD EVALUATE THE COST AND AVAILABILITY OF OTHER OPTIONS BEFORE TAKING OUT THIS LOAN. CUSTOMERS WITH CREDIT DIFFICULTIES SHOULD SEEK CREDIT COUNSELING.
    2. YOU SHOULD TRY TO REPAY THIS LOAN AS QUICKLY AS POSSIBLE. THE LOAN IS STRUCTURED AS A SINGLE OR MULTIPLE INSTALLMENT LOAN. IF YOU WANT ADDITIONAL TIME TO REPAY, YOU MAY APPLY TO THE LENDER FOR A PAYMENT EXTENSION OR A NEW LOAN TO REFINANCE A PORTION OF YOUR OUTSTANDING BALANCE.  IF YOU CHOOSE TO REFINANCE AN OUTSTANDING BALANCE, YOU SHOULD FIRST PAY DOWN THAT BALANCE AS MUCH AS YOU ARE ABLE.  DOING SO WILL SAVE YOU MONEY.
    3. YOU MAY RESCIND THIS LOAN WITHOUT FURTHER OBLIGATION IF YOU RETURN THE LOAN PROCEEDS, IN CASH OR THE ORIGINAL LOAN CHECK, PRIOR TO THE CLOSE OF BUSINESS NOT LATER THAN THE THIRD BUSINESS DAY FOLLOWING THE EXECUTION OF THIS AGREEMENT.
    4. YOU ARE PLEDGING YOUR MOTOR VEHICLE AS COLLATERAL FOR THIS LOAN. IF YOU FAIL TO REPAY THE LOAN PURSUANT TO THE LOAN AGREEMENT, YOU MAY BE AT RISK FOR LOSING THE SECURITY USED FOR THE LOAN.
  • Collateral – CSOs and Lenders will specifically inform the consumer that if the consumer pledges a vehicle as collateral, the consumer could lose the vehicle if the transaction is not fully repaid.  This notice language will be presented in bold type in the loan documents.  Alternatively, consumers will be required to initial this provision in the loan documents or on a separate notice.
  • Unencumbered Title – CSOs and Lenders will not make an AEL loan if, at the time the loan agreement is signed by the borrower, the motor vehicle’s certificate of title evidences that the motor vehicle is security for another loan or otherwise is encumbered by a lien.  Lenders will comply with all laws and regulations regarding the proper filing of liens on motor vehicles used as collateral for AEL loans.
  • Appraisal Standards – CSOs and Lenders will utilize nationally or regionally recognized motor vehicle valuation guides in determining the loan value of a motor vehicle.
  • Right to Rescind – CSOs and Lenders will provide consumers the right to rescind both the AEL and the CSO agreement on or before the close of the third business day following the date such agreements are executed.
  • Delinquent Loans – Members pledge to work with customers who are delinquent in the repayment of their loan, in an effort to help them get their loan current or back on track and to avoid an action against the security used to collateralize the loan.
  • Commercially Reasonable Manner – Lenders or their assignees will act in a commercially reasonable manner, without breaching the peace, in all aspects of the repossession and sale of the vehicle.  Upon repossession, all personal property found in the vehicle will be made available to the borrower in accordance with state law. After sale of a repossessed motor vehicle, any amounts in excess of the balance due on the loan, including permissible collection and repossession expenses, shall be refunded to the customer in accordance with state laws.
  •  Written Notice of Sale – Lenders and their assignees will give consumers notice as required by state law after repossession of the vehicle and prior to it being sold.
  •  Appropriate Collection Practices – Lenders and their assignees will collect past due accounts in a professional, fair and lawful manner and abide by the federal Fair Debt Collection Practices Act as applicable.   Members will not use unlawful threats or intimidation to collect accounts.
  •  No Criminal Action – Lenders and their assignees will not threaten or pursue criminal action against a customer as a result of the customer’s default.
  •  Enforcement – CSOs and Lenders will actively “self-police” the industry and will report suspected violations of industry “Best Practices” to the OCLA, which will investigate the matter and take appropriate action.
  •  Complaint Handling – Each member company will post the 1-800 numbers in a conspicuous place within each of their Ohio office locations so customers know where to submit complaints.  Complaints received through the toll free line will be referred to CSOs and Lenders.  Members will implement and maintain complaint handling procedures that include a timely review and response to each customer complaint.