Legislators in Texas Get Set for another Run at Predatory Lenders
About 12 million individuals make use of payday loans annually in the US. Every year borrowers take an average loan of 8 loans of about $375 and pay interest of $520. For most part, they are helpful for creditors having low credit scores in making up the short fall in cash until their next payday.
In every state, laws have been put up in place to protect consumers against predatory payday loan lenders, also known as loan sharks. However, there are still loopholes that allow lenders to exploit the borrowers.
Recently, attempts have been made by lawmakers in Texas to put greater restrictions on payday loan lenders. Here we will give an overview of the recent efforts that legislators have made in the Lone Star State to prevent consumers from getting ripped apart by predatory lending.
Payday Loans Regulations in Texas
Legislators in the state of Texas have made a number of attempts to put restrictions on payday loan lending. The regulatory provisions put forward by the payday loan lenders mirror ordinances that are being considered at the local level in different municipalities in the state.
Republican Tom Craddick has made about three attempts to pass greater restrictions on payday loans. He introduced House Bill 3047 last year in April along with a handful of other senators. The bill, if passed, would result in the creation of a statewide payday loan lending laws that are similar to the ones that are enforced at the city level.
The proposed bill had stated a limit on the loan amount of 20% of the borrower’s annual income. At present, there is no specified loan limit regarding the payday loan amount.
Another provision of the bill was to require a 25% principal installment payment. In addition, the provision states that loan lenders should allow only four installments without refinancing. Craddick intends to file a similar proposition to Austin in January next year.
Another senator named Wendy Davis who was the Democratic nominee for the governor in 2014 had proposed similar legislations to Craddick but it never made it out of the committee.
Craddick stated that there are large numbers of evidence that the current lending rules are not able to curb the negative effects of payday loans. It is draining resources of low income families and also charitable societies. He says that efforts must continue to address issues relating to predatory payday loan lending at both state and federal levels.
While efforts to put restrictions at the state level have languished, it has been successful at the municipality level. Now the legislators in Texas want the state laws to mirror the legislations at the local level.
Ann Baddour, the director of Fair Financial Services Project in Austin, said that the payday loan lenders should keep the product honest. Her company, that serves the interest of vulnerable Texans, has been able to push ordinances to put restrictions on payday loan and auto title loan lending at the City Council level that was validated by the Texas Supreme Court.
Around 35 cities in the state of Texas have imposed regulations that are identical in language and more strict than the state-wide regulations regarding payday loan lending. Now legislators, as well as agencies such as the U.S. Consumer Finance Protection Bureau (CFPB), are putting up efforts to bring similar changes at the state level as well. Whether they will succeed in achieving that goal is not certain at the moment.