It’s inadequate, but it’s the best we’re going to get out of this Legislature.
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.
Unfortunately, the payday lending lobby was very strong, and they managed to avoid the things they didn’t want like caps on their fees. Sen. Davis highlights what was not done and why it matters.
Sen. Wendy Davis, D-Fort Worth, refused to vote on the bill, instead voting “present.” During debate, Davis spoke out passionately against the payday loan industry and said efforts to regulate it have gone nowhere. She introduced several amendments to strengthen the legislation but pulled them “out of respect” for the bill’s sponsor, Sen. John Carona, R-Dallas. Carona said the bill had received widespread support from the players affected by the legislation and that any changes would destroy it.
“We haven’t done anything in the state of Texas to help the people who are at the vulnerable end of this predatory practice,” she said. She also criticized the payday loan lobby for influencing lawmakers.
Davis said the bill does go far enough because it does not cap interest rates, allow partial re-payment options or limit the number of times payday lenders can “roll over” unpaid loans. She pointed out a loophole in the state’s finance code that has allowed the lenders to operate in the same category as those organizations that are supposed to get people out of debt. Instead, she said, their customers end up in “a cycle of debt” and the number of payday lending centers around the state has increased significantly. She also railed against amendments passed in committee that will allow payday lenders to use “installment loans” and charge interest rates in excess of 600 percent.
A press release from Sen. Davis is here, and you can see here and here for some more background.. It must be noted that consumer groups supported passage of these bills, which as a half-a-loaf guy I do understand. My fear in this case is that these inadequate solutions will be seen has having “done something to solve the problem” and make it harder to get any momentum to take the necessary next steps on reform. As with everything else, it’s going to have to start with a better Legislature before any real work can get done.
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