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Legal & Compliance
Collateralized Personal Value Loan (CPVL)
TO:
Executive Management Committee, Product Strategy Group, Risk Management Division
FROM:
Senior Legal Compliance Officer
DATE:
December 9, 2025
The Collateralized Personal Value Loan (CPVL) will be a secured installment loan leveraging high-value personal property—consumer electronics, high-end bicycles, and sporting equipment—as collateral. The product will create a legally enforceable security interest under UCC Article 9 to mitigate credit risk and offer competitive rates to near-prime and sub-prime borrowers.
While the CPVL is legally viable in all five jurisdictions, it cannot be deployed as a monolithic product. The divergence in interest rate caps, fee permissibility, "right to cure" mandates, and deficiency judgment limitations requires a modular compliance architecture.
The central legal challenge is the interplay between the Uniform Commercial Code (UCC) and state Consumer Finance Laws (CFLs). UCC Article 9 provides mechanisms for "attachment" and "perfection" of security interests, but UCC § 9-201(b) contains a critical "saving clause" subordinating the UCC to applicable consumer protection statutes.
UCC Provides:
Security interest attachment & perfection
State CFLs Dictate:
Enforcement extent & borrower protections
Interest Rate Regime
Tiered 'Mini-Code' rates; Uncapped >$2,000 (Sec 8-8-5)
Late Fee / Grace
Greater of $18 or 5% (max $100)
Grace: 10 Days
Repossession Risk
Moderate. Strict 'Right to Cure' notice (10-15 days)
Deficiency Judgment
Permitted
Note: Strategy: Loan amounts >$2,001 bypass tiered caps
Interest Rate Regime
36% + Federal Funds Rate ($2.5k-$10k). AB 539 strict compliance.
Late Fee / Grace
$10 (10 days) or $15 (15 days)
Grace: 10/15 Days
Repossession Risk
High. 'Right to Reinstate' is broad; deficiency practically uncollectible
Deficiency Judgment
Highly Restricted / Impractical
Note: AB 539 rules strict; Min term 12 months
Interest Rate Regime
New 2024 Rates: 36% (<$10k) / 30% / 24%
Late Fee / Grace
$15 (Monthly), $7.50 (Bi-weekly)
Grace: 12 Days
Repossession Risk
High. No deficiency if balance <$2,000. 90-day Disaster Moratoriums.
Deficiency Judgment
Prohibited if unpaid balance <$2,000
Note: New: 36% tier effective July 1, 2024
Interest Rate Regime
~25% Criminal Usury Cap. Strict licensing.
Late Fee / Grace
PROHIBITED on Simple Interest loans
Grace: N/A
Repossession Risk
Very High. Judicial hostility to non-bank lenders; strict cure notices.
Deficiency Judgment
Disfavored; strict scrutiny
Note: Zero late fees allowed for this product structure
Interest Rate Regime
Add-on brackets (converts to ~32% APR). Inflation-adjusted.
Late Fee / Grace
5% of installment amount
Grace: 10 Days
Repossession Risk
Medium. 'Two-step' acceleration notice required.
Deficiency Judgment
Permitted
Note: Brackets adjust annually (CPI)
Regulator:
Alabama State Banking Department, Bureau of Loans
Governing Statute:
Alabama Consumer Credit Act (Mini-Code) - Title 5, Chapter 19
Regulator:
Department of Financial Protection and Innovation (DFPI)
Governing Statute:
California Financing Law (CFL) - Financial Code § 22000 et seq.
Regulator:
Florida Office of Financial Regulation (OFR)
Governing Statute:
Florida Consumer Finance Act - Chapter 516, Florida Statutes
Regulator:
New York Department of Financial Services (NYDFS)
Governing Statute:
Article 9 of the New York Banking Law (Licensed Lenders)
Regulator:
Office of Consumer Credit Commissioner (OCCC)
Governing Statute:
Chapter 342 of the Texas Finance Code (Consumer Loans)
| State | Max Interest Rate / APR | Late Fee Cap | Grace Period |
|---|---|---|---|
| AL | Tiered: $15/$10/$8 add-on. Uncapped >$2,000 | Greater of $18 or 5% (max $100) | 10 Days |
| CA | 36% + FFR ($2.5k-$10k). Tiered for <$2.5k | $10 (10 days) or $15 (15 days) | 10/15 Days |
| FL | 36% (<$10k), 30% ($10k-$20k), 24% ($20k-$25k) | $15 (Monthly), $7.50 (Bi-weekly) | 12 Days |
| NY | Effectively 24.99% (Criminal Usury Cap) | PROHIBITED on Simple Interest | N/A |
| TX | Add-on brackets ($18/$8 per $100) | 5% of installment amount | 10 Days |
| State | Pre-Repo Notice | Deficiency Judgment | Special Restrictions |
|---|---|---|---|
| AL | Notice of Right to Cure (10-15 days) | Permitted | Strict compliance with notice text (Barnes case) |
| CA | Notice of Intent to Dispose (15 days) | Highly Restricted | Right to Reinstate mandatory |
| FL | UCC Notice (10 days 'safe harbor') | Prohibited if <$2,000 | 90-day Disaster Moratorium |
| NY | Notice of Default (30 days typical) | Disfavored | High 'breach of peace' risk |
| TX | Notice of Intent to Accelerate (20 days) | Permitted | Two-step acceleration required |
Policy Requirement
Agents must be contractually prohibited from entering any structure (including open garages) without explicit verbal consent from an adult occupant at the time of repossession.
Breach of Peace Risk
Unlike vehicles parked outside, CPVL collateral (gaming consoles, bikes) is likely inside a residence. Entering a home without consent is a per se breach of the peace.
The "Collateralized Personal Value Loan" represents a viable market opportunity, but it sits atop a fractured regulatory landscape. Success requires abandoning the concept of a "uniform" national product in favor of a state-specific modular approach.
NY Late Fee Ban
Hard constraint
FL $2,000 Deficiency Floor
Hard constraint
CA 36%+FFR Rate Cap
Hard constraint
Approved By:
Senior Legal Compliance Officer
This document is for internal use only and does not constitute legal advice. Consult with licensed attorneys in each jurisdiction before product launch.