What Is a CAB Loan: Types, Fees, and Default Consequences

A CAB loan is a short-term, high-cost loan arranged in Texas through a licensed Credit Access Business, which does not lend you money itself but brokers a payday loan or auto title loan from a third-party lender and charges its own separate fee for the service. That fee is not capped by state law, and it is where almost all of the cost lives. On a typical two-week loan, the fee runs about $23 per $100 borrowed, which annualizes to an effective APR above 500%.¹

Why the Loan Has Three Parties Instead of Two

The Texas Constitution caps interest on most consumer loans at 10% per year. Anything higher is usurious.² A CAB loan works around that cap by splitting the transaction. Texas Finance Code Chapter 393 defines a Credit Access Business as a credit services organization that helps a consumer obtain a deferred presentment transaction (a payday loan) or a motor vehicle title loan.³ The outside lender funds the loan and keeps its interest at or below the 10% ceiling. The CAB handles the paperwork, finds the lender, guarantees repayment, and collects a brokerage fee that Texas law does not classify as interest. The fee has no statutory ceiling. Only its disclosure is regulated.⁴

So when you sign a CAB loan, you are agreeing to pay two things to two different parties: a modest interest charge to the lender, and a much larger service fee to the CAB.

The Two Kinds of CAB Loans

CAB loans come in two forms, and the consequences of falling behind are very different for each.

A deferred presentment transaction is the payday version. You write a post-dated check or authorize an electronic withdrawal for the loan amount plus fees, and the lender holds off cashing it until a set date, usually your next payday. Repayment can be a single lump sum or split into installments.³

A motor vehicle title loan is secured by your car. You hand over the title to an unencumbered vehicle, and the loan amount is based on the vehicle’s value. If you default, the lender or CAB can repossess the car.³

A missed payday loan leads to collection activity. A missed title loan can cost you your vehicle.

What You Actually Pay

Both charges appear as separate line items on the loan agreement. The lender’s interest is small. The CAB’s service fee is where the real cost sits, and the statute allows that fee to be calculated daily, biweekly, monthly, or on another periodic basis.⁴

In practice, CAB fees average about $23 for every $100 borrowed on a two-week to one-month term. Borrow $500 for two weeks and you owe roughly $115 in CAB fees on top of the lender’s interest. Annualized, that puts the effective APR above 500% for a typical borrower.¹ Before you sign, look for both line items and add them together. The total due is often significantly higher than the cash you walk out with, and the gap is fees.

The Rollover Problem

If you cannot repay the full balance on the due date, the CAB will usually let you extend the loan for another term. You pay a fresh round of fees. None of that payment reduces the original principal. The meter resets.

Run the math on a $1,000 payday loan rolled over at $30 per $100 every two weeks: $1,300 after the first term, $1,600 after one month, and nearly $8,800 after a year of continuous rollovers. That is almost nine times the amount you borrowed, and every dollar past the first $1,000 is pure cost. Each individual rollover feels manageable. The pile grows anyway.

A unified municipal ordinance adopted by 45 Texas cities limits rollovers to three and requires each payment to reduce the principal by at least 25%. Those same ordinances cap payday loan amounts at 20% of the borrower’s gross monthly income and title loan amounts at the lesser of 3% of gross annual income or 70% of the vehicle’s value. If you live in one of those cities, the rollover trap is bounded. If you live outside them, state law sets no ceiling on fees or extensions, only on disclosure.

What the CAB Must Show You Before You Sign

Under Section 393.223, a CAB must disclose the interest, fees, and APR for the loan compared to other forms of credit, the accumulated fees you would pay if you renewed at two weeks, one month, two months, and three months, and the typical repayment pattern for these loans.³ For a title loan, the CAB must also warn you in writing that you could lose the vehicle if you default.

Every CAB location and website must post a fee schedule, the name and phone number of the Office of Consumer Credit Commissioner’s consumer helpline, and a notice stating that these loans are not designed for long-term financial needs and that refinancing will cost additional charges.³ Missing disclosures are worth reporting to the OCCC, and you can also use the OCCC’s website to confirm that a given CAB is actually licensed before you apply.⁵

You will sign two main documents: a Credit Services Agreement that defines your relationship with the CAB, and a fee disclosure that lists every cost. Read the fee disclosure line by line.

What Happens If You Can’t Pay

Falling behind on a CAB loan is not a crime. No lender or CAB can have you arrested over an unpaid balance. What does happen depends on the loan type.

Payday Loan Default

The lender or a debt collector can sue in civil court. If they win a judgment, they can seek bank garnishment, which freezes a portion of the account balance. Texas does not allow wage garnishment for consumer debts; the Texas Constitution permits wage garnishment only for court-ordered child support and spousal maintenance.⁶ A payday lender or CAB cannot take money out of your paycheck in Texas, even with a judgment.

The more immediate hit usually comes earlier. Before anyone sues, the lender will try to pull the payment from the checking account you authorized at signing. Failed attempts generate insufficient-funds fees from your bank on top of the loan balance. A federal rule that took effect in March 2025 now prohibits covered lenders from making a third withdrawal attempt after two consecutive failures unless you specifically authorize it.⁷

Title Loan Default

A title loan default lets the lender or CAB repossess your vehicle. Before doing so, the CAB must comply with Texas Finance Code Chapter 392 and the federal Fair Debt Collection Practices Act. Under a 2023 amendment to the Finance Code, a CAB that repossesses and sells your vehicle generally cannot pursue you for any remaining balance unless you damaged the vehicle or refused to make it available after demand.⁸ You avoid a deficiency judgment in most cases, but you also lose the car.

If the Account Goes to a Collector

Once a CAB or its lender hands the account to a third-party debt collector, the federal Fair Debt Collection Practices Act kicks in. Collectors cannot call before 8 a.m. or after 9 p.m., cannot contact you at work if they know your employer prohibits it, and cannot publicly post about your debt on social media.⁹ If you have an attorney, the collector must deal with the attorney instead of you. Certain federal benefits, including Social Security, are generally exempt from garnishment even if a court judgment has been entered.¹⁰

If You Are Active-Duty Military or a Dependent

The Military Lending Act caps the military annual percentage rate at 36% for covered consumer loans, and the cap explicitly covers payday loans and vehicle title loans.¹¹ That 36% includes the CAB’s service fee, not just the lender’s interest, which effectively rules out the standard high-fee model for service members. A $23-per-$100 two-week fee breaks the cap on its own.¹² If you are active-duty or a dependent and the CAB does not ask about your military status before finalizing the loan, that is a compliance failure worth reporting to the OCCC.

1
Texas State Law Library. What Is the Maximum Interest Rate I Can Be Charged Under Texas Law – Section: Legal FAQs
2
Justia. Texas Constitution Article 16 Section 11
3
State of Texas. Texas Finance Code Chapter 393 – Credit Services Organizations
4
State of Texas. Texas Finance Code Title 5 Chapter 393 Subchapter G Section 393.602 – Applicability
5
Texas Office of Consumer Credit Commissioner. Credit Access Business
6
Texas State Law Library. Debt Collection – Collecting the Debt
7
Consumer Financial Protection Bureau. New Protections for Payday and Installment Loans Take Effect March 30
8
Texas Legislature. Texas HB 2410 – 88th Legislature Introduced Version
9
Consumer Financial Protection Bureau. What Laws Limit What Debt Collectors Can Say or Do
10
Consumer Financial Protection Bureau. Can a Payday Lender Garnish My Bank Account or My Wages if I Dont Repay the Loan
11
Office of the Law Revision Counsel. 10 USC 987 – Terms of Consumer Credit Extended to Members and Dependents
12
Consumer Financial Protection Bureau. I Am in the Military Are There Limits on How Much I Can Be Charged for a Loan