Payday loan reform slows, campaign cash flows

Posted Tuesday, Apr. 02, 2013  comments  Print Reprints

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Skirmishing over proposals to tighten restrictions on payday and auto-title loans provides a lesson in money and politics.

There's the industry, which, according to Texans for Public Justice, contributed $2.3 million to Texas elected officials' political campaigns in 2012.

There are cities, such as San Antonio, Dallas and most recently Denton, that have imposed their own limits to deter predatory practices.

Then there's an array of consumer advocacy groups pushing for state laws to help prevent low-income people from getting locked into an impossible cycle of debt by exorbitant fees. As @TXCatholic, the public policy voice of Texas bishops, tweeted last week: "How can anyone look poor in eye yet back a bill allowing 659% APR + fees on $500 loan? Demand REAL payday reform!"

A revised SB1247 by Sen. John Carona, R-Dallas, has drawn complaints for watering down his original proposals.

But at a March 19 hearing of the Senate Business and Commerce Committee, which he chairs, Carona said the legislation would provide "substantial movement from where we are today" even though it wouldn't satisfy all sides.

Laws enacted in 2011 require that short-term lenders get licensed and make information clearer to borrowers. The Office of Consumer Credit Commissioner also makes quarterly public reports about loans and other actions, such as vehicle repossessions.

But Texas law doesn't restrict the interest rates or fees companies can charge, nor does it impose other regulations that could help prevent struggling consumers from getting in over their heads.

Carona's bill would cap loans at a percentage of a borrower's monthly income or the value of a vehicle, and it would make it easier for those who can't fully repay a loan on time to pay in installments without additional fees.

But the Center for Public Policy Priorities called "absurd" a proposal to allow loans of up to 40 percent of a borrower's monthly income. The bill originally included a 20 percent limit. A proposed five-day wait between loans was reduced to two.

Carona insisted that the worst outcome would be getting no bill passed this session. He promised to "clean the industry up the best we can" but then said there weren't votes in the Legislature for big change: "This industry has amassed enormous political support here at the capital."

That's a powerful, if discouraging, message.

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