A Guide to Title and Payday Loans in

Delaware

The Delaware Subprime Marketplace: Title and Payday Loans in Delaware

At a Glance
Delaware, USA
  • Nickname: Diamond State
  • Population: 945,934
  • Capital: Dover
  • Website: www.delaware.gov
Download Fact Sheet

With 945,934 residents, Delaware’s poverty rate is 12.4 percent compared to the national average of 15.5 percent.1 While the poverty rate is below the national average, Delaware still sits at $5.35 billion in debt with a debt per capita of $5,962.2 So where do Delaware consumers turn when they need money in a pinch? Many might turn to bad credit loans, like payday loans or title loans for that “quick fix” cash. But with no limit on the APR, how can residents afford payday loans?3

Delaware Debt and Income vs U.S. Debt and Income
Delaware
US
$5,962.86
$56,375
Debt per Capita
$44,765
$56,516
Median Household Income

Analyzing Payday Loans in Delaware

Like most states, payday lenders in Delaware outnumber McDonald’s restaurants at 34 to 82 (23rd in the country)—that’s 10 lenders per 100,000 people.5 Payday loans regulated in the state of Delaware under the Small Loan Act or Licensing Law, but the APR has no set limit under the statute.6 This means payday lenders can charge interest on a loan at any rate they see fit. On average, though, the APR on payday loans in Delaware is 532 percent.7

History of Payday Loans in Delaware

In the culmination of a decade of work to protect vulnerable borrowers, Delaware passed HB 289 in 2012. The law contains a provision that limited the number of payday loans a consumer could take out to five over a twelve-month period. H.B. 289 also changes the definition of short-term consumer loans to include loans up to $1,000 rather than $500.8

This bill even provided an establishment of a database to track the number of short-term consumer loans an individual obtains in a 12-month period.8 Lastly, the bill instructs the Delaware Banking Commissioner to provide a report on the prevalence and nature of these payday loans to the General Assembly.8

Quick Fact

In 2015, 6,219 payday loans were taken out in Delaware.7 On average, these loans were paid off in 22.1 days.7 The total amount of these loans was approximately $2.5 million with total interest and fees of $520,000.9

During the period of January 2015 to December 2015, 6,219 short-term consumer loans were taken out—totaling $2.5 million.9 And what was the cumulative interest and fees charged on those loans? $520 thousand! During this period in 2015, an estimated 57 percent of borrowers opened two or fewer loans, and 28.5 percent took out three to five loans each.9

While the number of payday loans in Delaware has dropped from 36,675 in 2013 to 6,219 in 2015, the predatory practice of payday lending still persists in Delaware.9 The average annual percentage rate of the typical payday loan in Delaware is 532 percent.9 The number of loans allowed each year per borrower might have been limited to five, but the APR continues to remain high.9

Quick Fact

In 2015, borrowers defaulted on 1,722 loans, which represents a default rate of 27.7%.9

The maximum amount allowed for a payday loan in Delaware is $1,000 at a time—no additional loans are allowed until the previous is paid (that’s good!).10 Unfortunately, in terms of finance charges, fees or interest rates, as well as APR, there is no set limitation for a lender.10 This allows lending companies to decide on their own accord how much to charge a borrower.

Requiring the borrower’s signature before a loan is granted is normal procedure for most states. However, in Delaware a thumb print is required apart from the actual signature. The use of a thumb print was introduced to protect residents from fraudulent actions of dishonest lending companies.11

Delaware Payday Loan Rules and Regulations
  • Maximum loan amount:$1,000
  • Loan Term:60 days
  • Rollovers Permitted:Four are allowed
  • Fees and finance charges:Not Specified
  • Finance charge on a 14-day $100 loan:No Limit
  • APR on a 14-day $100 loan:No Limit
  • Maximum Number of Outstanding Loans at a Time:A limit of five loans from all licensees in a 12-month period
  • Repayment Plan:Voluntary workout agreements with equal installments, a minimum of 90 days, and no fees or interest.
  • Cooling-off Period:None provided
  • Collection Fees:One fee for non-payment if the contract allows, not to exceed 5% of the payment amount. Attorney fees and court costs10

The thumb print feature for payday loans is unique to Delaware payday loan regulations. Whether a borrower applies for a payday loan online, in person or by the phone, a thumb print is needed for validity—that’s a relief for residents of Delaware.11

Aside from the given restrictions of payday loans in Delaware, some additional restrictions are imposed on lenders per legislation. For payday lenders providing deferred loans, the loan amount cannot be rolled over within a 12 week window from the date on which the loan agreement is entered into with the borrower.12

State legislation also does not allow a payday lender to charge additional interest on deferred loans with an outstanding balance 10 weeks after the loan agreement date.12 Adding to that, payday lenders are also not allowed to initiate any criminal proceedings against any borrower in the state of Delaware in case of a default. These rules and regulations were created to help protect residents of Delaware.12

Quick Fact

As of 2010, the thumb print requirement reduced the rate of fraud cases by 60% (that’s great news!).11

Final Notes on Payday Loans in Delaware

Delaware legislation has created several laws and regulations to help protect its residents from the predatory ways of payday loans. However, while the laws do help prevent some misleading ways of payday lenders in Delaware, lenders still find ways to charge borrowers even more money. Payday loans are limited to five a year, but there is no set limit on interest charged—this is where lenders charge the most money.6

An Analysis of Title Loans in Delaware

Living paycheck to paycheck is stressful, but when the ends don’t meet one week what option do you have? While taking out a title loan in Delaware might seem like the best short-term option, think again. Title loans are easy to get, but they can end up costing you your car.

Under Delaware law, title lenders can charge whatever interest rate they see fit. Typically, interest rates on title loans are about twenty five percent a month, which comes out to a 300 percent APR.13 Think of it this way—if a person with bad credit gets a “not-so-good” credit card, they will pay an APR of 25 percent, which is considered extremely high in the credit card world.13 Now look at title loans—25 percent interest per month, or 300 percent APR. That’s twelve times the amount!13

Quick Fact

If you borrow $1,000 in a title loan in Delaware, you will pay $3,000 in interest alone, plus the $1,000 principal. Is $4,000 worth the extra cash you are looking for?13

In a report updated in January 2017 by the Center for Responsible Lending [PDF], Delaware consumers faced $29,803,284 in annual car title loan fees.14 These fees are even more excessive when compared to the $520,000 in annual payday fees charged to Delaware consumers.15 With such a large difference, shouldn’t Delaware take the same measurements as payday loan rules and regulations? You’d think so.

The Background of Title Loans in Delaware

Delaware has one title lender per 10,000-20,000 residents, which means each store handles a lot of loans—that’s just more money in their pockets.16 In 2013 Delaware only had 56 title lenders—these Delaware lenders serviced 12,712 title loans with a total volume of $13,245,904 during that time.15

Title Lenders and Title Loan Volume

Delaware

icon-delaware

56 Delaware Title Loan Stores14
$13,245,904 Total Delaware Title Loan Volume14

Alabama

icon-alabama

672 Alabama Title Loan Stores14
$158,950,848 Total Alabama Title Loan Volume14

New Hampshire

icon-new-hampshire

43 New Hampshire Title Loan Stores14
$10,170,962 Total New Hampshire Title Loan Volume14

While the number of title lenders in Delaware remains low today, it doesn’t prevent borrowers from seeking out title loans in Delaware. Consumers will seek out loans, even when provided with fewer options: look at New Hampshire—with only 43 stores, borrowers still took out $10,170,962 total loans in 2013.15 This is the same for Delaware—borrowers still managed to take out $13,245,904 in title loans with only 56 stores in that window.15

Delaware Title Loan Restrictions

Before a borrower signs a title loan agreement in Delaware, the title lender is required to provide certain disclosures to the consumer (seen below). These disclosures must also be clear and concise for easy understanding. If Delaware title lender fails to provide these disclosures, the borrower can rescind the loan at any time for up to one year from the final payment date on the original loan agreement. At that point, the borrower is only responsible for the outstanding principal—if the fees and interest paid exceed the unpaid proceeds of the loan, the lender must refund the amount.17

Quick Fact

There are seven written disclosures required by title lenders in Delaware in a conspicuous format.16 16 Per 77 Del. Laws, c. 164, § 1; § 2252 Disclosures, the 7 requirements include the following disclosures:16

1. “The loan you are considering entering into is strictly for short-term cash, and is not a solution for long-term financial problems.”
2. “You, as borrower, are not compelled to complete the loan agreement merely because you have received any disclosures.”
3. “If you sign the title loan agreement, the title loan lender will obtain a security interest in your motor vehicle, and if you fail to meet the obligations of the title loan agreement, the lender can take possession of your motor vehicle and sell it.”
4. “If the lender takes possession of your motor vehicle, you may lose equity in that vehicle.”
5. “You have a right to rescind the title loan agreement for any reason, at no cost to you, at any time up to the end of the business day following the day in which the loan proceeds of the title loan were disbursed to you by returning the full amount of the loan proceeds to the title lender.”
6. “You have the right to receive information about credit counseling services from the Office of the State Bank Commissioner.”
7. “You may file a complaint with the Office of the State Bank Commissioner if you believe your lender has violated any law regarding your title loan.”16

On average, a title loan borrower will roll over their loan eight times.13 This means they are telling the lender eight different times that they can’t pay the loan off this month—it makes a lender happy, but not the borrower. Delaware law provides a bit of protection to consumers from an endless title loan rollover, providing that a consumer can’t opt for a title loan rollover in Delaware that would extend the repayment period beyond 180 days, or six months, from the agreement date (when you received the money).13

In many states where title loans are legal, lenders can repossess your car at the drop of a hat. If you’re two days late on a payment, you might find your car gone in the morning.13 However, in Delaware, title loan lenders must first offer you a workout agreement before they are able to repossess your car. This means you have a chance to keep your car. The workout agreement requires consumers with an outstanding title loan to make payments that result in a net deduction of at least 10 percent each month on the outstanding portion of the loan.13

You will get 10 business days to accept the agreement before the title lender repossesses the car—it buys some time to get money together to pay off your loan.13

Quick Fact

Per Delaware law, a workout agreement is not equal to a default. The lender can’t take the car unless the borrower defaults on the workout agreement.13

If the workout agreement defaults, and your car is repossessed (we’re sorry), the Delaware title lender can no longer charge you interest on the loan. It’s sad to say that many lenders will often continue to charge you interest until the car is sold at auction. The lender has to notify the borrower that the car was sold, let the consumer know whether there was a deficit or surplus of funds, and notice that the sale has satisfied all of the outstanding proceeds of the title loan.13

When the title lender sells your car, your title loan woes will be over. However, was it worth all that hassle for $300? Didn’t think so..

Final Notes on Title Loans in Delaware

Delaware attempts to protect borrowers from the predatory ways of title lenders, but the current regulations still allow title lenders to take advantage of consumers. At the end of the day, title lenders in Delaware still want one thing: your money. For a thousand-dollar title loan, borrowers can end up paying $4,000 and possibly lose their car in the process.13 The moral to the story is: try and find alternative options before resorting to a title loan in Delaware

Regulating Payday and Title Lenders in Delaware

Payday loans and title loans in Delaware are marketed to financially struggling individuals. As this article has shown, the reality is these loans drain hundreds of dollars from a person’s bank account in amounts well over the original loan amount. Many times, borrowers are paying thousands of dollars just for a one-time loan of $300—it’s not worth the stress or hassle.

Unfortunately, many residents in Delaware don’t realize the predatory effects of payday and title lenders until it’s too late. So, if you’ve already taken the blind leap and taken out a payday or title loan in Delaware, what can you do to protect yourself from harassment?

If your payday or title lender in Delaware is violating the law (they’re misleading, harassing, or overcharging), you need to speak up. By reporting predatory lenders who continue to break the law in Delaware, you can help protect yourself and other potential victims. There are resources available in Delaware, but it is also important to remember:

  • Regulators will first have you attempt to resolve the issues on your own.
  • Document everything the lender does—the more evidence the better your case is.
  • Payday and title lending are legal in Delaware, but certain restrictions remain in place to protect borrowers (know what the laws are)

Report any violation of state payday loans and title loans legislation to the Office of State Bank Commissioner (OSBC) by calling (302) 577-6722 (from New Castle County) or (302) 739-4235, or by sending a complaint to 555 East Loockerman Street, Dover, DE 19901. You can also e-mail the Office of the State Bank Commissioner.

Information for the Delaware Office of the State Bank Commissioner:
  • Address:555 East Loockerman Street, Dover, DE 19901
  • Phone:(302) 577-6722 (from New Castle County) or (302) 739-4235
  • Website:http://www.banking.delaware.gov/index.shtml

Outside Help for Payday and Title Loans in Delaware

Aside from the Delaware Office of the State Bank Commissioner, you can reach out to the National Community Reinvestment Coalition (NCRC) for further guidance. NCRC member, Delaware Community Reinvestment Action Council (DCRAC) is winning victories in the backyard of payday loan companies in Delaware. By breaking the cycle of predatory lending in Delaware, the DCRAC works to continue to protect residents from the predatory ways of payday and title lenders in Delaware.

Consumer Protection in Delaware

Delaware lawmakers continue to look for ways to further protect residents from falling prey to predatory lenders. Through the help of different lawmakers and legislatures, Delaware has helped keep its consumers safe.

To help Delaware continue their battle against payday and title lenders, reach out to your local representative. With more information, lawmakers can continue to fight for new legislations. And, by understanding the warning signs, Delaware payday and title loan laws, and where to report a lender or seek outside legal guidance, you can help set new laws and legislations into action. Yes, it won’t change overnight, but it is a battle worth fighting for the protection of Delaware residents.

Utilize the Delaware payday loan and title loan page as a go-to resource all your needs—it’s got all the information you need in one place.

Guides to Payday and Title Loans in Delaware Cities

You know payday and title loans in Delaware are a problem. But what about at the city level?

Check out these payday and title loan guides for the following cities in Delaware…

Dover | Wilmington

Works Cited

  1. “Delaware” United States Census Bureau. Accessed February 13, 2017. https://www.census.gov/quickfacts/table/PST045216/10
  2. “State Debt” Ballotpedia. Accessed February 13, 2017. https://ballotpedia.org/State_debt
  3. “Payday Loan Consumer Information” CFA. Accessed February 13, 2017. http://www.paydayloaninfo.org/state-information/15
  4. “State Debt” Ballotpedia. Accessed February 13, 2017. https://ballotpedia.org/State_debt
  5. “McDonalds’ vs. Payday Lenders” California State University Northridge. Accessed February 13, 2017. http://www.csun.edu/~sg4002/research/mcdonalds_by_state.htm
  6. “Payday Loan Consumer Information” CFA. Accessed February 13, 2017. http://www.paydayloaninfo.org/state-information/15
  7. “Lawmakers eye caps on changing payday lending industry” The News Journal. Accessed February 23, 2017. http://www.delawareonline.com/story/news/local/2016/08/26/lawmakers-eye-caps-changing-payday-lending-industry/87632062/
  8. “State of Delaware Short-Term Consumer Loan Program” Office of the State Bank Commissioner. Accessed February 23, 2017. http://banking.delaware.gov/pdfs/annual/Short_Term_Consumer_Loan_Database_2015_Operations_Report.pdf
  9. “Payday Loan Consumer Information” CFA. Accessed February 13, 2017. http://www.paydayloaninfo.org/state-information/15
  10. Delaware Payday Loan Law and Legislation” UStatesLoans.org. Accessed February 23, 2017. http://www.ustatesloans.org/state-de.html
  11. “Payday Lending State Statutes” National Conference of State Legislatures. Accessed February 23, 2017. http://www.ncsl.org/research/financial-services-and-commerce/payday-lending-state-statutes.aspx
  12. “Title Loans in Delaware” Drive-Safely.net. Accessed February 27, 2017. http://www.drive-safely.net/title-loans-in-delaware-everything-you-need-to-know/
  13. “Payday and Car Title Lenders Drain $8 Billion in Fees Every Year” Center for Responsible Lending. Accessed February 15, 2017. http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf
  14. “Payday and Car Title Lenders Drain $8 Billion in Fees Every Year” Center for Responsible Lending. Accessed February 15, 2017. http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf
  15. “Car-Title Lending” Center for Responsible Lending. Accessed February 27, 2017. http://www.responsiblelending.org/state-of-lending/reports/7-Car-Title-Loans.pdf
  16. “Title 5: Other Businesses Under Jurisdiction of State Banking Department” State of Delaware. Accessed February 27, 2017. http://delcode.delaware.gov/title5/c022/sc05/index.shtml