Lawmakers from both chambers met on Wednesday to support a series of bills that would limit the loan amount and the number of payments offered by payday lenders and auto lenders.
“We have lost ground, and that is why it is important to do this press conference today – we have a very unified front,“said the senator. Rodney Ellis, D-Houston, alongside the Senator. Royce West, D-Dallas, and State Rep. Tom craddick, R-Midland. They have all introduced bills to regulate the payday lending and auto securities industry. “We have to put this back on the scene,” Ellis added.
The press conference follows two hearings in which Senate and House committees considered bills to regulate loans offered by payday lenders and auto title lenders, collectively known as the ‘credit access companies. While supporters of the bills mocked companies for what they see as predatory behavior, opponents have expressed reluctance to increase state involvement that would restrict business operations in the state.
“It’s a sad day in Texas when the No.1 state in income and job creation charges the highest rates on payday loans,” Craddick noted. “From 2013 to 2014, Texans paid $ 2.9 billion in fees for these very high cost loans.”
Earlier Wednesday, the House Committee on Investments and Financial Services considered Bill 3047, written by Craddick, which would create statewide law similar to municipal ordinances already in place statewide. The proposed legislation would limit loans to 20% of the borrower’s annual income, allow only four installments without refinancing, and require a 25% principal payment on each installment. It would also create a database, overseen by the Consumer Credit Commissioner, which would collect data on lenders and borrowers.
These companies “send money to the consumer with a exorbitant costsassists J. Ross Lacy, City Councilor for Midland, testifying before the committee. “It traps consumers in a cycle of debt from which they can never recover.”
Midland, in the heart of the Craddick District, is one of 22 cities in Texas that have passed ordinances limiting loans offered by payday lenders and auto lenders. After the order went into effect, Lacy said five of the 18 credit access companies had gone out of business.
“In the current system, [these companies] seem to benefit more from a client’s financial failure than from a consumer’s financial success, ”said Joe Sanchez, associate state director for advocacy at AARP Texas, adding that one in five borrowers in the state is over 50 years old.
Rob Norcross, spokesperson for the Consumer Service Alliance of Texas, opposed the bill. “The way the municipal ordinances are structured, it would be good for certain types of single payment payday loans,” he said. “But the requirement that they divide the loan into no more than four pieces will still be too expensive for some people to repay.”
While Norcross was the only person to testify against the bill in the morning session, several committee members expressed concerns about the legislation. Rep. state Giovanni Capriglione, R-Southlake, called the creation of a database for private and state entities “intrusive,” while suggesting that Lacy and the town of Midland were trying to impose their own model on the rest of the state.
representing Phil stephenson, R-Wharton, questioned whether or not the state should play the role of protecting people from themselves.
“We have seen these products increase service time with the customers we serve,” said Katherine von Haefen, Senior Program Manager at United Way of Greater Houston. “Inevitably these families will have a financial emergency and payday lenders are rushing to trap these families.“
“Do you think they’re forcing families to borrow money from them?” Asked the state representative. Dan Flynn, R-Canton. “You don’t really think someone is pouncing on someone.”
Capriglione added that he lives near an intersection with a number of Starbucks, but that they were not responsible for his behavior. “If I buy a $ 5 latte, it’s mine, ”he said.
But for Janice Rivera of Belton, the terms of the auto title loan she and her family took out have never been clarified. “I am one of those who fell into the trap,” she told the committee. “They said I misunderstood the 20 pages of paper they gave me, and in March of this year we had paid $ 2,100 in fees and still hadn’t paid off our original $ 1 loan. $ 500. “
On Tuesday, the Senate Business and Commerce Committee considered Senate Bill 121, by West, which would set income-based loan limits and refinance limits. He also considered Senate Bill 92, by Ellis, which is a complementary bill to the legislation tabled by Craddick.
All bills are currently pending in committee.