The idea that payday and auto title lenders in Texas should be more regulated is not a new concept. But while such laws exist at the municipal level in some Texas cities, attempts to pass legislation at the state level have failed. At an April 29 press conference at the state capitol, lawmakers and others presented their support for state laws regulating credit access businesses.
Audio transcript:
Haslett: In Austin today, lawmakers from both the Republican and Democratic parties presented their support for bills regulating the payday and auto title loan industry in Texas. Both the House and Senate are considering measures that would place limits on such lenders, including capping the amount of any loan at 20 percent of the borrower’s annual income. This morning, a press conference on the topic was held by Republican former House Speaker and current state Representative Tom Craddick of Midland, along with Democratic state Senators Rodney Ellis of Houston and Royce West of Dallas. Among private organizations supporting new regulations is the AARP of Texas. Tim Morstad is Assistant State Director of the AARP. He says that the new rules being considered would not put an onerous burden on the payday loan industry.
Morstad: We’re not talking about throwing these businesses out of the state and out of business. We’re looking at measures that are very reasonable, very middle-of-the-road. Some of these have been tried in cities across the state that strike the right balance, that preserve people’s access to credit, but also puts some reasonable limits around these loan products, themselves, to make sure that the borrowers have a fighting chance for success.
Haslett: Despite the bipartisan support presented today at the Capitol, not everyone wants to see payday lenders face new regulations. A representative from Consumer Services Alliance of Texastestified against new laws at this morning’s event. That organization lobbies on behalf of payday and vehicle title lenders, referred to as credit access businesses. Lawmakers expressing concerns included Giovanni Capriglione, a Republican state Representative from Southlake. He questioned a provision that would create a credit database of borrowers and lenders. Capriglione called it “intrusive.” Other lawmakers raised a philosophical question as to whether the state should protect people from their own bad decisions. Supporters of new rules said the existing model gives lenders an incentive to trap consumers in a cycle of debt. AARP’s Joe Sanchez said lenders seem to benefit most when borrowers can’t make payments and can only afford to pay fees without ever paying down the principal. As for why the AARP is involvedhere, Morstad said this issue affects his constituency more than some might think.
Morsetad: A recent survey that looked at payday lending borrowing in Texas found that 1 in 5 payday loan borrowers were 50 or older. AARP is very concerned about the long term financial security for these people, but beyond that, we have heard story after story of our members who are working with their kids and grandkids to break free from these high cost loans. And so we feel that we’ve got a direct interest in figuring this out once and for all for the entire state.
Haslett: Some Texas cities already have some payday lender regulation at the municipal level. Dallas was the first Texas city to pass such laws. In Northeast Texas, there are no cities that have local rules governing credit access businesses. Other municipalities in the Dallas area with such laws are Denton, Garland and Flower Mound. A link to the Texas Municipal League’s list of cities with payday loan regulations is available at our website, KETR.org.
