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AUSTIN – A bill that creates a common-sense statewide solution to the payday lending crisis threatening the financial security of hundreds of thousands of Texans was filed today in the Texas House of Representatives. The measure limits some of the worst short-term lending abuses in the state and mirrors the strong work done by 20 Texas cities over the past few years.
House Bill 2808, by Representative James White, R-Woodville, tracks the key provisions of the municipal ordinances in the following ways:
• limits the number of allowed refinances to four;
• requires a partial pay down of 25 percent for each refinance; and
• tightens definitions in current law to make consumer protections easier to enforce.
“House Bill 2808 represents a sensible approach to end the cycle of debt that traps so many Texas families,” said AARP State Director Bob Jackson. “City ordinances in Texas are taking some of the bite out of the payday lending debt trap, but all Texans deserve the same protection from unscrupulous lending practices that one-third of the state’s residents now enjoy.”
The payday loan industry is big business in Texas, with one in five borrowers 50 years of age or older. Among these individuals, 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.
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 never able to pay down the loan. For example, a fast cash payday advance of $500 that is rolled over five or more times could wind up costing $1,200 or more. For many borrowers, the average cost to repay a payday loan in full accounts for 36 percent of their gross monthly income, which is more than typical housing expenses. This is a debt trap that many can’t escape.
I think online loans aren’t so bad as somebody may think. One has to remember that this is huge responsibility and one day he will have to replace borrowed money. Well, I’m a student, I need money for my education and my family believes that I should get loans. I’ve never tried one, but my friends usually use Personal Money Service and recommend it. I think it’s important to remember to think twice before applying for loans.
Sounds like the people who get into these loans should actually read the documents they’re signing, instead of just jumping in and grabbing the “free money” and then being so shocked when there are fees and interest, especially when they don’t pay back the loan according to the terms.