Texas Must Get A Handle on Budget Busting Payday Loans

This week, fair lending advocates echoed concerns we laid out in a new report about the increasingly expensive payday and auto title loans being charged to Texans. Commissioner Leslie Pettijohn with the Office of Consumer Credit Commissioner (OCCC), which oversees the lending industry in Texas, told members of the House Investment and Financial Services committee that the number of longer, more expensive loans–known as installment or multipayment loans–is growing. The loan fees and terms are growing quickly as well, trapping Texans in the cycle of debt for longer periods of time.
The Center for Public Policy Priorities released the first year-to-year analysis of Texas’ payday and auto title lending data, made available by the OCCC thanks to a state law passed in 2011. We found that Texans paid more in payday and auto title loan fees in 2013 compared to 2012 and remained in debt longer, even though they took out fewer total loans during that same time. Overall, the number of new loans made to Texas consumers fell by 4 percent, to just under 3 million new loans in 2013, but the fees charged to Texas consumers rose by 12 percent, to just under $1.4 billion.
“The big issue is that it’s costing a lot more for Texans to borrow $500 than it did before, which is kinda hard to believe,” I shared with the Texas Observer this week. When Texans can borrow, they are able to contribute to their local economies and provide for their families, and they should be able to borrow small amounts of money without being taken advantage of, but as the data shows consumers end up paying obscenely more in fees than the original loan amount.
As we note in the report, and as the Dallas Morning News and other media outlets pointed out this week, the state has been chronically inactive in dealing with the out-of-control industry for the last two or three legislative sessions, prompting 16 cities, including Dallas, to pass their own local ordinances. Communities like Midland and Lubbock are also talking about passing similar ordinances.
But local ordinances can only do so much. Texas must do something, such as improving the OCCC’s local and regional data collection and making loan costs more transparent.

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