Off the Kuff Rotating Header Image

Payday lending prospects look grim in the House

From the Observer:

Late into the night on Monday, the payday loan industry strutted its stuff before a very friendly House committee. The hearing came just a week after the Senate passed a surprisingly tough bill that the industry insists would shut down most of Texas’ 3,400 payday and auto-title storefronts. Even though the legislation aired last night is a faint shadow of the Senate bill, it got a rough treatment from six of the seven committee members.

Only the chairman and author of the bill, Rep. Mike Villarreal (D-San Antonio) evidenced any interest in cracking down on the industry.

“I think the tone of the committee was that clearly there was no support for what Villarreal put out there, at least right now,” said Ann Baddour of Texas Appleseed.

What happens next is anyone’s guess but it is possible that payday reform is dead for the session.

[...]

Villarreal’s bill is considered by consumer groups to be a minimalist reform effort. The Senate version would close a loophole that allows payday and title lenders to get around Texas’ anti-usury laws and charge unlimited rates. Instead it would impose a strict 36 percent APR cap on loans, effectively scuttling the business model in Texas. The Villarreal proposal, which focuses on limiting the number of “rollovers” and imposes modest limits on the size of loans based on borrower income, has only received tepid support from consumer groups.

The wording here is a little confusing. Rep. Villarreal has his own bill, HB2706, which was heard in committee on April 22 and which is pending in committee. I believe this bill is similar to the pre-amendment version of Sen. Carona bill, which is SB1247. That now-tougher bill, which passed the Senate last week, is what Rep. Villarreal brought up in committee this Monday. Rep. Villarreal is the chair of the Investments & Financial Services committee, but only one other member of the committee is a Democrat, and two of the Republicans are quoted in the story giving rhetorical foot massages to the payday lenders and the curious notion that their lightly regulated existence is necessary for truth, justice, and the American way. As the man said, you don’t need to be a weatherman to know which way the wind blows.

What happens next is impossible to predict but billions in revenues hang in the balance.

Daniel Freehan, the CEO of Cash America International, acknowledged as much on a conference call with analysts last week.

“Dozens of different scenarios could unfold at this point that run the gamut of this bill never getting out of the House committee, to a bill that passes the House in identical form of Senate Bill 1247. In between these two extremes are multiple permutations that could develop, and it’s impossible to predict how this may unfold with any reasonable degree of confidence.”

A worst-case scenario from the point of view of the reformers is legislation that would strike down city ordinances but not add any new statewide regulations. One such pre-emption only bill, House Bill 2953 by Rep. Ryan Guillen (D-Rio Grande City), is already headed to the House floor.

Last night, Rob Norcross of the Consumer Services Alliance of Texas, a group that represents 80 percent of all the payday and title storefronts in Texas, tried to play down the pre-emption issue, saying that he believed the industry would prevail in its court. But there’s no doubt that ordinances passed in Austin, Dallas, San Antonio, El Paso and Denton are cutting into profits. In January, Mark Kuchenrithe, the CFO of Austin-based EZCorp, told analysts that the company’s “profitability… was negatively impacted by over $1 million” during the last quarter of 2012 “as a result of ordinances enacted in Dallas and Austin.”

Here’s HB2953. Far better that nothing passes than this does. I’m okay with rolling the dice in the courts if it comes down to it. BOR has more.

UPDATE: The Trib adds on.

Related Posts:

One Comment

  1. [...] Kuff posts that Payday lending prospects look grim in the House. [...]

Bookmark and Share