Tuesday, May 24, 2011

Payday Loan Bills Make it Through Texas Legislature

HB2592 and HB2594, bills designed to provide increased public disclosure by payday lenders and provide state oversight of auto-title loan companies has passed both houses of the state legislature.

CitySquare, the United Way of Metropolitan Dallas and the Jewish Community Relations Council formed the Anti-Poverty Coalition of Dallas, the goal of which was to move 250,000 people out of poverty in the next 10 years. The first issue worked on by the coalition has been payday lending.

The Coalition worked state-wide with Texas Impact, Texas Faith for Fair Lending, the Christian Life Commission, Texas Appleseed and other allies to find legislation remedy for thousands of families across the state, as well as Dallas, trapped in a cycle of debt after becoming involved with these businesses.

The legislation that has worked its way through the both houses of the legislature is far from perfect and each of our organizations has pledged to keep a watchful eye on the industry to see if it does indeed provide relief. But we've also committed to making certain that we'll be back to strengthen these laws in two years.

Here's more information on the passage of these two bills in the Texas Observer a few days ago and the Dallas Morning News yesterday.

Payday Reform: Could it Finally Pass?

Published on: Thursday, May 19, 2011
Consumer advocates, religious representatives and legislators hastily convened a press conference in the rain Thursday on the south steps of the Capitol to celebrate a victory for Texas consumers.
For the first time in Texas, two payday reform bills, HB 2592 and HB 2594 look like they might actually pass the Legislature. HB 2592 requires that payday lenders provide more disclosures about loan fees and HB 2594 requires that payday storefronts be licensed.

The bills passed the Senate Business and Commerce committee Wednesday and are close to final passage. “This hasn’t been the biggest headline grabber,” Republican Senator John Carona, the Senate sponsor of the bills, said of the legislation, “But it’s a significant issue for consumers across the state. And it’s been the most over-lobbied issue of the session – I don’t think there’s an unemployed lobbyist in the state right now.”
Payday lenders are virtually unregulated in Texas and they’ve made millions off of working families charging interest rates anywhere from 300 APR to 1,000 APR. It’s a booming business that the industry is trying mightily to preserve. Already, the payday, pawnshop and auto-title lenders have spent between $3.9 million and $8.4 million on 184 Texas lobby contracts from January 2009 through March 2011, according to the nonprofit Texans for Public Justice. When the lobby reports come in after session, I suspect we’ll see several million more was spent on trying to kill payday reform bills such as HB 2592 and HB 2594.

Which is why Republican state Rep. Vicki Truitt, House author of the reform bills, was hesitant to claim victory at the press conference Thursday. Earlier in the session, the lobby had already torpedoed Truitt’s HB 2593, the so called “controversial” piece of reform legislation, because it would actually enact meaningful reform by limiting the amount and number of loans consumers could take out during a certain time period – breaking the cycle of debt. “The journey isn’t over,” Truitt said. “There are still two very significant votes: one on the Senate floor and the other in the House to bring it back to the full body.”

Truitt had good reason to be cautious. How to explain the bizarre scene on the House floor last week as Truitt battled to pass HB 2594, which would require payday lenders to license their storefront operations. Not only did Truitt have to contend with an army of lobbyists and conservative groups sending out a flurry of last minute emails to legislators to vote against the bills, but also Houston Rep. Gary Elkins who owns a chain of payday lending stores. “I’m free market capital and laissez faire…and this is nothing more than the expansion of government,” Elkins huffed. “I’m just a small business guy with 50 employees. I don’t have a corporate attorney.”

Truitt responded: “Are you aware…do you understand that the language in these bills was negotiated between the industry and advocates?”

“Well, I didn’t agree to it,” Elkins said, after offering his amendment to gut the bill, which was eventually defeated.

On the other side of the debate that day, was former House Speaker Tom Craddick who argued that Truitt’s bills didn’t do enough. Craddick’s bill would have effectively closed down payday lenders but it never got out of Truitt’s committee.

“It’s a bunch of junk that’s not going to help,” Craddick told me on the House floor. “I would have gotten my bill out if Truitt had allowed it. I had the votes to get it out of committee, and I think I could have passed it on the floor.”

Legislators and advocates said Thursday they would have liked more stringent reform bills to pass this session. “In some ways these bills disappoint because they don’t go far enough,” Carona said. “But it’s a step forward in protecting consumers.”

Tim Morstad from the AARP, which had lobbyed to pass the bills said it was the first significant win in 10 years of fighting for reform in the industry. “A lot more work needs to be done,” he said. “But it’s a good first step if we get the bills passed.”

Bee Moorhead, executive director of Texas Impact, a grassroots coalition of religious groups, said the bills would provide important information about the industry of which they know little. “We’ll be able to find out more about whose applying for the loans and how the industry is growing,” she said.

Payday lending bills get Senate approval

By Kelley Shannon 


Senators took the plunge into payday lending reform Monday, passing two House bills that bring some oversight to the largely unregulated industry in Texas.

Sen. John Carona, R-Dallas, said the legislation represents a "very, very delicate compromise" between consumer groups and the payday and auto title lending industry.

The legislation by Rep. Vicki Truitt, R-Keller, requires more disclosures by lenders about their fees and requires the companies to obtain licenses and report data to a state agency.

Sen. Wendy Davis, D-Fort Worth, and Sen. Royce West, D-Dallas, pushed for stronger regulation and a cap on fees. The Truitt proposals don't cap fees, which can often climb as high as 500 percent.
Those who take out payday loans and cannot pay them off roll them over, incurring even more fees and sometimes falling into a cycle of debt.

"Historically, Texas has taken a hands-off approach to the regulation of this industry," Davis said in an impassioned speech, urging senators to think of those who get trapped in rolled over loans. "They're poor, they're voiceless and they're not here in the halls of the Capitol."

Davis and West said they wanted to add several amendments to the legislation, but decided not to in most cases so as not to endanger the bills' passage. West did try an amendment, and it was was tabled. Davis said the bills make "the smallest little advancement," but include some steps backward.
"If we don't pass something, we will simply set us back two more years," Carona said. He said there will be further examination of the industry before the next legislative session in 2013.

Consumer groups like Texas Impact, AARP and the Baptist Christian Life Commission backed the bills, as did the Consumer Service Alliance of Texas, an industry group.

A third bill by Truitt with more stringent restrictions on the lenders didn't garner industry support and died in the House. The two surviving bills, which were amended in the Senate, now head back to the House.

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