AUSTIN — A group of consumer, civic and religious organizations are urging key House and Senate committees this week to comprehensively address abusive lending practices by payday and auto title lenders that cost Texas consumers an estimated $1.4 billion annually in fees.
Today, the House Investments and Financial Services Committee will hear a slew of payday and auto title lending bills, including two measures supported by the partner organizations that track the unified city ordinances already adopted by 22 Texas cities. The hearing will be held in Room E2.028 of the Texas Capitol Extension.
“It’s high time for the Legislature to extend to all Texas families the same borrower protections that one-third of Texans already enjoy,” said Bob Jackson, AARP Texas State Director. “The measures we support strike a reasonable balance between protecting consumers and preserving adequate access to credit, and build upon the successful track record of the municipal ordinances already in place.”
Among the bills supported by Texas Fair Lending Alliance (TFLA) member and partner organizations is HB 3047, authored by the senior-most member of the Texas Legislature — Rep. Tom Craddick (R-Midland) and HB 2808, sponsored by one of the Legislature’s newer members, Rep. James White, (R-Woodville).
HB 3047 and HB 2808 would:
- Limit loans to no more than four payments: four installments with no refinance or, for single-payment loans, no more than three refinances;
- Require a 25 percent principal pay-down with each refinance or installment; and
- Tighten definitions in current law to make consumer protections easier to enforce.
Representative Craddick’s HB 3047 adds the collection of data at the individual borrower level to streamline enforcement and better gauge the cycle of debt that traps all too many borrowers.
Leaders of faith-based organizations are urging the committee to pass the bills with deliberate speed.
“This is a moral issue that demands urgent action from our elected leaders,” said the Rev. Joseph Parker of the David Chapel Missionary Baptist Church in Austin. “Predatory loans with high interest rates and fees take advantage of people and have created a crisis for individuals, families and our state. Now is the time for comprehensive reform of these lending practices.”
Current Texas laws do not limit the fees payday lenders and auto title businesses can charge. There is also no limit to the number of times these businesses can charge high fees for essentially the same loan. These lending practices often trap borrowers in a cycle of debt where they are unable to pay off the loan.
One such borrower is Janice Rivera from Belton. “When I got the loan, I was in a desperate situation and didn’t understand that I wouldn’t be able to pay it off,” she said. “I paid $2,100 for a $1,500 loan. After twenty-one months, Helping Hands Ministry paid what I owed. I will never get another car title loan from them again and I would never recommend it to anyone that I know.”
Yesterday, the Senate Business and Commerce Committee heard its own group of short-term lending bills, including SB 92 by Senator Rodney Ellis (D-Houston), which is identical to Rep. Craddick’s HB 3047.
Also heard was SB 121 by Senator Royce West (D-Dallas), which establishes separate, income-based loan limits for certain extensions of credit under Credit Access Business. Among other changes, the bill limits on the number of times an extension of credit can be refinanced, loan amounts based on a percentage of the borrower’s income, types and limits of loans that can be offered, maximum loan terms (180 days) and number of outstanding loans at any given time. It also brings the loan charges in line with Texas consumer lending laws and preserves a local jurisdiction’s ability to adopt ordinances.
Both bills were left pending, a routine procedure that leaves the measures open for a vote at any time a quorum of committee members is present.
The payday loan industry is big business in Texas, with one in five borrowers 50 years of age or older. Among Texans 45 and older, 75 percent say they strongly support government leaders in Texas working to lower the cost of payday and auto title loans, according to a survey by AARP.
