Dallas Morning News: Tough payday lending bill faces obstacles in Texas House
April 15, 2013
By CHRISTY HOPPE
AUSTIN — Consumer advocates turned to a House committee Monday hoping to hold payday lenders to the same fees and interest rates required for other financial businesses in Texas. Consumers and even lawmakers have expressed frustration over the industry’s political clout, which they says has stymied new regulations. The multibillion-dollar credit business has mushroomed in recent years. Because of rollover and fees, the lenders sometimes charge more than 500 percent annual interest to their customers, most of them elderly on fixed income or working poor.
Gail Rowland of Houston told the House Investments and Financial Services Committee that she got caught in a trap with a payday loan. She said that she has worked full time for 10 years and managed expenses until a medical need arose. So she turned to a payday lender. Although she has repaid the principal, she said she owes much more thanks to fees and rollovers and does not see a way out. “Am I responsible for the decision I made? Absolutely,” Rowland said. “But the payday lenders help us make bad decisions.” She pointed out that with a check, a driver’s license and a pay stub, she was in and out of the loan office with the money in 10 minutes. “I’m asking you, I’m pleading with you for Texas consumers. We need your help,” she told lawmakers.
Catholic, Baptist and other religious leaders also testified that such lenders are preying on desperate people who are often poor. The credit service industry defends its practices, saying its clients have little credit and high risk. They say most clients repay their loan in a short period without the compounding cost of high fees and interest. Pat Cirillo, president of Cypress Research, which has conducted research for payday lenders, said Texas credit service companies are better than the alternative. She said that in states with regulations on payday lenders, between 15 percent and 30 percent of their consumers turned to Internet-based companies. Those companies, some of them from overseas, had worse interest rates and much more aggressive collection strategies, she said. “Elimination of storefront options has unintended consequences,” she said.
Former House Speaker Tom Craddick, R-Midland said his bill to extend current regulations to payday lenders still would provide generous interest rates of up to 80 percent. He cited a woman from his hometown who took out a $5,000 loan and ended up owing $12,000. “We need to get control of it,” he said. Many Republicans on the panel appeared reluctant to support the bill, partly because of the online issue Cirillo cited.
Another bill, one offered by Sen. John Carona, R-Dallas, would limit the number of rollovers and provide consumers with installment payments, but it does nothing to cap fees and interest. Many cities and consumer advocates oppose it because it would supersede much tougher municipal regulations in Dallas, San Antonio, Austin, El Paso and Denton.