Texas Governor Rick Perry has signed two bills to regulate payday lenders in the Lone Star State. It is the result of the hard work of a number consumer protection advocates and agencies around the state that have worked to get legislative relief for citizens throughout Texas trapped in a cycle of debt because of the predatory practices of this industry.
Just a few days prior to the Governor signing the legislation, the Fort Worth Star Telegram reported...
"The state's first steps toward regulating payday loans are drawing a surprising consensus from the industry and consumer advocates."
"Awaiting Gov. Rick Perry's signature are two measures passed by the Legislature last month that will bring payday lenders and auto title lenders under the authority of the Consumer Credit Commission, which is charged with writing the final rules governing such businesses in Texas. The bills establish a licensing and regulatory framework for the short-term consumer loans, while stopping short of capping fees or loan amounts."
""We understand this is pretty historic by Texas standards -- getting a new regulatory scheme in place for a big industry," said Don Baylor, senior policy analyst at the Center for Public Policy Priorities in Austin. While Baylor said he would have preferred limits on the size of loans based on borrowers' income and how many times a payday loan can be renewed, he thinks "it's important to have clear, simple, standard disclosures so the consumer can make an informed decision.""
"Lenders say they don't have a problem with those efforts, although the Consumer Service Alliance of Texas, an industry group, opposed efforts to cap rates charged on the loans."
""We're happy this passed. A lot of legislators told me they wanted to get some regulations on the books," said Dan Feehan, CEO of Fort Worth-based Cash America International, the nation's biggest operator of pawnshops and a payday lender.""
"More than 3,000 storefronts make payday or auto title loans in Texas, according to state filings.
Payday loans are cash advances, generally for a week or two. A borrower writes a check for the loan amount, plus a fee -- a common amount is $15 per $100 borrowed -- while the lender holds the check for the agreed time, after which it can be cashed or redeemed by the borrower."
"Auto title loans have generally longer terms, typically a month, and the borrower puts up a paid-up title to a vehicle as collateral."
On this issue, we didn't quite get everything we wanted. But all legislation involves negotiation and compromise. But, more importantly and at its best, it also involves the engagement of citizens who want to see change and are willing to work for it! And I can't help remember the number of people in and out of the political arena who personally told me that we would get 'nothing' out of the legislature because it was so conservative. I never believed it and fortunately neither did the advocates and legislators who served as our allies.
As a friend of mine wrote when notifying us of the victory, "...Mandatory CSO licensing through the OCCC, consumer & transaction data reporting, clear and comparative disclosures of fees & typical repayment patterns, a Texas Financial Education Endowment that's funded through fees on the CSOs, disclosure of an OCCC helpline number to consumers, and restitution to customers injured by a CSO's violation of the law or Finance Commission rule -- congratulations to all of you who worked so hard to move the ball on this historically intractable issue."
"And look out, 83rd Legislature: HB 2593's loan product regulations may not have survived this time, but you better believe this isn't over!"
For CitySquare, this is the second straight legislative session in which we have successfully worked to pass legislation benefiting neighbors victimized by systemic injustice. Last session our advocacy in Austin, public awareness work and effective coalition with other organizations resulted in legislation which increased compensation for the wrongfully convicted.
As for payday lenders, on March 25, CitySquare's public policy work resulted in a land use zoning ordinance, passed unanimously by Dallas' City Council. And, we're not quite through, this Wednesday, the City Council will vote on a companion zoning ordinance which will regulate the operation of payday and auto title lenders.
CitySquare is proving that the most effective way to address the root causes of poverty is by direct service and advocacy. We hope you're encouraged and inspired to join us in making a difference and making history!