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FAQ's

Title Pledge Lenders

LICENSING AND OPERATIONAL QUESTIONS

Q: If a licensee operates both a Deferred Presentment Services Act office and Title Pledge office at the same location, does the licensee have to close the location at 6pm, or can the licensee stay open past 6pm and do Deferred Presentment Services transactions?

A: The hours of operation provided in Tenn. Code Ann. § 45-15-115(a)(8) are specific to title pledge lenders and have no bearing on other business operations conducted at the same office location. Nothing prohibits a title pledge lender from accepting payments at any time.
 

Q: Do title pledge lenders have to initiate a new title pledge agreement every thirty (30) days when the agreement matures?

A: No; Tenn. Code Ann. § 45-15-113(a) sets forth the term of the title pledge agreement as 30-days; however, “such agreements may provide for renewals for additional 30-day periods, which may occur automatically,” unless one of four events has occurred as enumerated under Tenn. Code Ann. § 45-15-113(a)(1)(2)(3) and (4). The property pledge agreement must specify that automatic renewals will occur if that is the intent of the agreement. Additionally, certain disclosures must be provided to the pledgor with every renewal as specified in Tenn. Code Ann. § 45-15-113(b). The title pledge lender must substantiate that the applicable disclosures were provided and document the title pledge agreement file accordingly.
 

Q: Must the pledgor satisfy the first property pledge agreement before taking out a second property pledge agreement on the same pledged property?

A: No. A pledgor may have more than one property pledge agreement provided the following conditions are met: 1) each property pledge agreement is made separately; 2) a 5% principal reduction is made at the 3rd and subsequent renewal for each property pledge agreement; and 3) property pledge agreements are made to the same pledgor, on the same title, from the same title pledge lender at the same location; and 4) the amount of money loaned, when combined with the outstanding balance of other outstanding title pledge agreements the pledgor has with the same lender secured by any single certificate of title, does not exceed $2,500.
 

Q: If a pledgor paid $100 off on a $300 property pledge agreement, then subsequently needs the $100 back at a later date, does the pledgor need to have two (2) separate property pledge agreements due at two (2) separate times, or can a title pledge lender combine these into one property pledge agreement?

A: Tenn. Code Ann. § 45-115(16) specifically prohibits the consolidation of title pledge agreements. However, a pledgor may have more than one property pledge agreement provided the following conditions are met: 1) each property pledge agreement is made separately; 2) a 5% principal reduction is made beginning with the 3rd renewal and at each subsequent renewal for each property pledge agreement; and 3) property pledge agreements are made to the same pledgor, on the same title, from the same title pledge lender at the same location; and 4) the amount of money loaned, when combined with the outstanding balance of other outstanding title pledge agreements the pledgor has with the same lender secured by any single certificate of title, does not exceed $2,500.
 

Q: What happens if a title pledge lender does a second property pledge agreement on the same title and the pledgor pays one property pledge agreement on time but defaults on the second property pledge agreement?

A: Each property pledge agreement, whether against the same title or another title, is to be considered independent of any other property pledge agreement; therefore, (in the example given) the title pledge lender would have the option to repossess the vehicle due to the default on the second property pledge agreement against the same title.

 

Q: If a title pledge lender already has a lien on a title, do they have to record a second lien on the same title if another loan is done?

A: No, because the lien is already perfected if the certificate of title is already in the title pledge lender’s possession and shows the title pledge lender as a lienholder. if multiple property pledge agreements are made to the same pledgor and secured by the same pledged property, the following conditions must be met: 1) Each property pledge agreement is made separately; 2) A 5% principal reduction is made at the third and each subsequent renewal for each property pledge agreement; and 3) the property pledge agreements are made to the same pledgor, on the same title, from the same title pledge lender at the same location; and 4) the amount of money loaned, when combined with the outstanding balance of other outstanding title pledge agreements the pledgor has with the same lender secured by any single certificate of title, does not exceed $2,500.
 

Q: Can title pledge lenders do two or more property pledge agreements for a pledgor if the pledgor uses separate titles (different vehicles)?

A: Yes. Tenn. Code Ann. § 45-15-115(3) specifies that a property pledge agreement against any single pledged property title is limited (in the aggregate) to $2500.00; therefore, it is permissible for a title pledge lender to lend up to $2500.00 to serve the same pledgor against a separate (different) pledged property title.

 

Q: Why are title pledge lenders treated differently from brokers, banks, etc. (i.e., they can add interest and other charges to payments)?

A: Under current law, Tenn. Code Ann. § 45-15-111(a) provides that title pledge lenders may charge a customary fee of up to 1/5 of the original principal amount to cover “all…expenses” of the lender, except for the actual cost of repossession under Tenn. Code Ann. § 45-15-111(b). Banks, brokers, and others may not charge a fee that amounts to up to 20% of the original principal, in addition to being restricted in the rates of interest charged to borrowers.

 

RECORDKEEPING QUESTIONS

Q: If a licensee has a Deferred Presentment Services or Check Cashing Act business in addition to the Title Pledge Act business at the same location, does the licensee have to keep separate files for title pledge transactions?

A: Yes. A separate file must be maintained for each title pledge transaction.

 

Q: Do separate records mean title pledge lenders must have a separate computer system for title pledge transactions?

A: No. The required title pledge transaction log and repossession log may be maintained manually. A template title pledge transaction log is available for download and printing HERE.  A template repossession log is available for download and printing HERE.

 

Q: If a title pledge lender retains the title pledge agreement with all of the required information, is this adequate for recordkeeping purposes?

A: No. A record of all title pledge agreements must be kept on a consolidated title pledge log and must be made available during examinations.  A template title pledge transaction log is available for download and printing HERE.


Q: Will there be examples of title pledge logs available from the Department?

A: Yes.  A template title pledge transaction log is available for download and printing HERE

 

RATES, FEES AND OTHER CHARGES QUESTIONS

Q: What is the maximum allowed interest and fee rate allowed for title pledge lenders under the Tennessee Title Pledge Act?

A: Tenn. Code Ann. § 45-15-111(a) sets forth the interest and fees that may be charged. Tenn. Code Ann. § 45-15-111(a) specifies that the title pledge lender may contract for and receive an effective rate of interest not to exceed 2% per month; additionally, the lender may charge a fee equal to no more than 1/5 of the original principal amount (or unpaid balance in the case of renewals).
 

Q: Can a title pledge lender charge less than the maximum allowed rates?

A: Tenn. Code Ann. § 45-15-111(a) sets forth the maximum rates of interest and the fees that may be charged to the pledgor under the terms of the title pledge agreement. If a title pledge lender elects to charge less than the interest and/or fee permitted under the Act, this is a business decision left to the discretion of the title pledge lender.
 

Q: If interest and fees are collected on the day the title pledge agreement is made and the pledgor returns in 15 days and pays off the title pledge agreement, is a refund required?

A: No. Title pledge interest and fee allowed under Tenn. Code Ann. § 45-15-111(a) shall be deemed earned, due and owing as of the date of the title pledge agreement or property pledge agreement.
 

Q: Can a title pledge lender charge a pre-payment penalty if the pledgor pays off the title pledge agreement early?

A: No. A so-called “pre-payment penalty” may not be assessed a pledgor per Tenn. Code Ann. § 45-15-115(12). If, for example, the pledgor pays the full amount owed under the title pledge agreement (accrued but unpaid interest, fees, and principal) at some time prior to the payment due date or maturity date of the title pledge agreement, no additional charges (in the form of “pre-payment penalty” or otherwise) may be assessed.
 

Q: Can a title pledge lender pass on the cost to the pledgor of recording the lien if the pledgor exercises their one-day right of rescission after a lien is filed?

A: No. Under current law, Tenn. Code Ann. § 45-15-111(a) provides that title pledge lenders may charge a customary fee of up to 1/5 of the original principal amount to cover “all…expenses” of the lender, except for the actual cost of repossession under Tenn. Code Ann. § 45-15-111(b).

 

Q: If the title pledge agreement is in default at the expiration date, can a title pledge lender charge any additional interest and fees?

A: No. Tenn. Code Ann. § 45-15-115(2) states if the title pledge agreement is in default, the only recourse available to the title pledge lender is repossession of the pledged property.

 

GRACE PERIODS, DEFAULT AND REPOSSESSION QUESTIONS

Q: When a payment is due on the 1st and the pledgor makes a payment on the 21st, is the new payment due date the 21st?

A: No. In a scenario where the original payment due date is the first of the month and the pledgor pays late, the contract will continue to renew on the same day of each subsequent thirty-day period. The title pledge interest and fee allowed under Tenn. Code Ann. § 45-15-111(a) shall be deemed earned, due and owing as of the date of the title pledge agreement or property pledge agreement and a like sum shall be deemed earned, due and owing on the same day of each subsequent thirty-day period if renewed.
 

Q: What options does a title pledge lender have if prior to repossession of pledged property it is determined that the pledged property has no value?

A: Under the Title Pledge Act, if the pledgor defaults on the title pledge agreement, the title pledge lender’s recourse is limited to repossession and sale of the pledged property. If the title pledge lender determines that the pledged property has no value, the title pledge lender may repossess and sell the pledged property for salvage. If the title pledge lender chooses, for whatever reason, not to repossess the pledged property, they have the option to charge off the balance owing. Refer to Tenn. Code Ann. § 45-15-114 and Tenn. Code Ann. § 45-15-115(2) which detail the recourse available to the title pledge lender under the Act. The Department cannot offer advice regarding recourse outside of the recourse available under the Title Pledge Act.

 

Q: What is the title pledge lender’s recourse if the pledged property is destroyed or if another lien is recorded against the pledged property?

A: Under the Title Pledge Act, if the pledgor defaults on the title pledge agreement, recourse is limited to repossession and sale of the pledged property. If the title pledge lender determines the pledged property has no value, the title pledge lender may repossess and sell the pledged property for salvage. If the lender chooses, for whatever reason, not to repossess the pledged property, the title pledge lender has the option to charge off the balance owing. Refer to Tenn. Code Ann. § 45-15-114 and Tenn. Code Ann. § 45-15-115(2) which detail the recourse available to the title pledge lender under the Act. The Department cannot offer advice regarding recourse outside of the recourse that is available under the Title Pledge Act.
 

Q: When the title pledge lender repossesses the pledged property and the pledgor has stolen the radio, backseat, tires, tire jack, etc., can the title pledge lender replace these items and add the cost of replacing these items to the pledgor’s account?

A: No. Tenn. Code Ann. § 45-15-111(b) states that a title pledge lender may assess and collect, as reimbursement, a repossession charge not to exceed the actual amount charged by any company or companies, attorney or attorneys and/or contractor or contractors to repossess the titled personal property and deliver such titled personal property to the storage facility of the title pledge lender.

All other costs incurred post repossession are covered under Tenn. Code Ann. § 45-15-111(a) which states in part that the customary fee of 1/5 of outstanding principal balance includes all other costs of doing business and the assumption of risk.

 

Q: Can a title pledge lender sell a past due title pledge agreement to its repossession agent?

A: No. Tenn. Code Ann. § 45-15-105(a) specify that “no person shall engage in the business of title pledge lending without having first obtained a license. This section of the Act is interpreted to include collecting or otherwise servicing title pledge agreements. Tenn. Code Ann. § 45-15-106(g) provides that the license is not transferable or assignable.

 

Q: Can a title pledge lender recover storage costs if its repossession agent repossesses the pledged property and charges storage fees while holding the pledged property for the statutorily-required twenty (20) days?

A: Tenn. Code Ann. § 45-15-111(b) states that a title pledge lender may assess and collect, as reimbursement, a repossession charge not to exceed the actual amount charged by any company or companies, attorney or attorneys and/or contractor or contractors to repossess the titled personal property and deliver such titled personal property to the storage facility of the title pledge lender. The Department views any storage costs and mechanics liens prior to repossession as included in the actual repossession charge, provided that documentation in support of actual costs is maintained by the lender.

All other storage and repair costs incurred post repossession are covered under Tenn. Code Ann. § 45-15-111(a) which states in part that the customary fee of 1/5 of outstanding principal includes all other costs of doing business and the assumption of risk.

 

Q: If a title pledge lender retains a repossession agent and the repossession agent repossess the pledged property and holds the pledged property at the agent’s place of business in a storage yard and charges storage to the titled pledge lender, can the title pledge lender pass on these storage charges to the pledgor?

A: No. Tenn. Code Ann. § 45-15-111(b) states that a title pledge lender may assess and collect, as reimbursement, a repossession charge not to exceed the actual amount charged by any company or companies, attorney or attorneys and/or contractor or contractors to repossess the titled personal property and deliver such titled personal property to the storage facility of the title pledge lender. The Department views any storage costs and mechanics liens prior to repossession as included in the actual repossession charge, provided that documentation in support of actual costs is maintained by the lender.

All other storage and repair costs incurred post repossession are covered under Tenn. Code Ann. § 45-15-111(a) which states in part that the customary fee of 1/5 of outstanding principal includes all other costs of doing business and the assumption of risk.
 

Q: After pledged property is towed to a wrecker service, the pledgor does not provide the location of the pledged property to the title pledge lender, and the wrecker service does not waive any towing or storage fees, can the title pledge lender recover these fees from the pledgor?

A: Yes. Tenn. Code Ann. § 45-15-111(b) states that a title pledge lender may assess and collect, as reimbursement, a repossession charge not to exceed the actual amount charged by any company or companies, attorney or attorneys and/or contractor or contractors to repossess the titled personal property and deliver such titled personal property to the storage facility of the title pledge lender. This may include costs such as a mechanic’s lien on a vehicle, impoundment and storage costs if the vehicle is seized by a third-party.

All other costs incurred post repossession are covered under Tenn. Code Ann. § 45-15-111(a) which states in part that the customary fee of 1/5 of outstanding principal includes all other costs of doing business and the assumption of risk.

 

Q: Are title pledge lenders required by law to repossess pledged property?

A: No.


Q: What does a pledgor have to pay to redeem pledged property if the pledged property is located six months after the pledgor defaults on the property pledge agreement?

A: Pursuant to Tenn. Code Ann. § 45-15-114(a), once the pledged property is repossessed, the pledgor has twenty (20) days to redeem the pledged property by paying the interest, fees, principal and any repossession charges owed on the pledged property.  Please see Department Bulletin C-08-1 regarding automatic renewals, grace periods, and repossessions.

 

Q: Can title pledge lenders add their internal costs related to repossession of pledged property to the property pledge agreement as repossession costs when the pledged property is repossessed?

A: No. Tenn. Code Ann. § 45-15-111(b) states that a title pledge lender may assess and collect, as reimbursement, a repossession charge not to exceed the actual amount charged by any company or companies, attorney or attorneys and/or contractor or contractors to repossess the titled personal property and deliver such titled personal property to the storage facility of the title pledge lender. The Department views any storage costs and mechanics liens prior to repossession as included in the actual repossession charge, provided that documentation in support of actual costs is maintained by the title pledge lender.
 

Q: If a title pledge lender repossess pledged property and stores the pledged property on its lot or at its storage facility, is the title pledge lender required to have insurance?

A: Yes.  Tenn. Code Ann. § 45-15-116 requires the title pledge lender to provide a safe place for the keeping of the pledged property.  The title pledge lender shall have sufficient insurance coverage on the pledged property, in the event of loss or damage, for the benefit of the pledgor to pay the title pledge value of the pledged property as written on the title pledge agreement.  The insurance policy shall name the commissioner as an additional insured party for the protection and benefit of the pledgor.

 

Q: What does the state consider to be a fair repossession charge?

A: The State does not determine what a “fair” repossession charge may be in the industry. Tenn. Code Ann. § 45-15-111(b) states that a title pledge lender may assess and collect, as reimbursement, a repossession charge not to exceed the actual amount charged by any company or companies, attorney or attorneys and/or contractor or contractors to repossess the titled person property and deliver such titled personal property to the storage facility of the title pledge lender. The title pledge lender must be able to demonstrate to examiners that the repossession charge consists of the actual amount charged by third parties to repossess the vehicle.

 

Q: If the pledged property is repossessed and held for twenty (20) days, where must the pledged property be kept and/or placed in order to sell?

A: Under Tenn. Code Ann. § 45-15-114(a), the title pledge lender is required to retain possession of the vehicle during the twenty (20) day holding period.

The requirements for sale in Tenn. Code Ann. § 45-15-114(b)(2) do not specify a location for sale but provides that the sale must be conducted in a commercially reasonable manner.
 

Q: If the pledged property is not sold during the sixty (60) day period after the twenty (20) day holding period, what other alternatives are available to title pledge lenders for disposition?

A: Tenn. Code Ann. § 45-15-114(b)(2) does not provide additional alternatives other than for sale within sixty (60) days.

Thus, after the 60 days, the title pledge lender may dispose of the pledged property in whatever manner it chooses, at its own cost. (i.e. salvage, donation, etc.)

 

MISCELLANEOUS QUESTIONS

Q: How do title pledge lenders reimburse to a pledgor the surplus proceeds from the repossession and sale of the pledged property if the title pledge lenders are unable to locate the pledgor?

A: The title pledge lender may report the unclaimed property to the Unclaimed Property Division (“UPD”) of the Treasury Department at P.O. Box 198649, Nashville, TN 37219-8649, telephone number (615) 253-5362.
 

Q: What recourse does a title pledge lender have if the title pledge lender cannot locate the pledged property?

A: Under the Title Pledge Act, if the pledgor defaults on the property pledge agreement, recourse is limited to repossession and sale of the pledged property. If the title pledge lender determines that the pledged property has no value, the title pledge lender may repossess and sell for salvage. If the title pledge lender chooses, for whatever reason, not to repossess the pledged property, they have the option to charge off the balance owed. Tenn. Code Ann. § 45-15-114 and Tenn. Code Ann. § 45-15-115(2) detail the recourse available to title pledge lenders under the Act.
 

Q: Since title pledge lenders cannot sue for any types of fees and/or deficiencies, what other options are available for recouping losses?

A: If a pledgor has defaulted on an agreement, the lender’s only recourse is repossession of the vehicle. Tenn. Code Ann. § 45-15-115(2). However, per Tenn. Code Ann. § 45-15-111(b) the lender has the right to recover the actual amount charged by any company, attorney and/or contractors to repossess the pledged property and deliver the pledged property to the storage facility of the title pledge lender. The Department views any storage costs and mechanics liens prior to repossession as included in the actual repossession charge, provided that documentation in support of actual costs is maintained by the title pledge lender.

 

Q: Does a title pledge license give title pledge lenders the right to sell these vehicles without other restrictions?

A: No. Tenn. Code Ann. § 45-15-114(b)(2) provides that the sale of pledged property must be done in a commercially reasonable manner, as provided under Tenn. Code Ann. Title 47, Chapter 9, Part 6. The sale must commence within sixty (60) days of the expiration of the twenty (20) day holding period following the pledgor’s default of the title pledge agreement.

The Act does not relieve the title pledge lender from complying with any other law, rule or regulation that is not provided under Title 45.

 

Q: Are title pledge lenders required by the Commissioner to obtain a motor vehicle dealer license for the purpose of selling pledged property that has been repossessed?

A: No. Based on the language contained in Tenn. Code Ann. § 55-17-102(17)(e), which states: “(17) ‘Motor vehicle dealer’ and ‘motor vehicle salesperson’ do not include the following: (e) All banks, finance companies, loan companies, insurance companies, auto body shops or garages that have not obtained a motor vehicle for the purpose of resale, selling or offering to sell used motor vehicles directly to the public without the intervention of any other person, when such sales are merely incidental to their primary business activities.” This statute would apply to title pledge lenders as long as the sales conducted are incidental to their primary business of title pledge agreements. Consequently, no motor vehicle dealer license would be required to conduct such sales.

 

Q: Since title pledge lenders are lien holders on pledged property, can the title pledge lender sell the pledged property without being required to have any additional license?

A: The Title Pledge Act does not provide any exemption from any other law, rule or regulation regarding licenses.