Other Voices

It’s time to reform the predatory lending industry

A loan store on South Cooper Street in Arlington.
A loan store on South Cooper Street in Arlington. Star-Telegram

Can you imagine taking out a $500 loan and it costing more than $1,100 to pay it back?

Every day in the Fort Worth-Arlington metro area, many of our neighbors are doing just that and paying up to 484 percent in interest and fees on small, short-term “payday” and auto-title loans.

These absurd interest rates are completely legal in Texas, due to the inaction of the Legislature, which refuses to pass meaningful reforms to rein in what is largely an unregulated industry.

As a result, payday and auto-title lenders are allowed to charge unlimited interest and fees, effectively trapping low-income families in a cycle of debt.

Many think that because they have not taken out a loan, they are not affected. That’s not the case.

Because payments to predatory lenders are automatically deducted from the borrower’s checking account, other bills are often neglected, leading to loss of utility services, no money to put gas in the car and no way to pay the rent.

Often, the only available solution is to take out another loan or to seek help from local nonprofits and churches.

Research by the Texas Catholic Conference, Texas Appleseed and others shows that in Texas an estimated 32 percent of clients in need of charitable assistance are in trouble with payday or auto-title loans.

If you make a charitable contribution, do you really want a portion of it going to subsidize a payday lending corporation? I certainly don’t.

Statewide, about 850 vehicles per week are repossessed by auto-title lenders. That’s at least 850 people a week who suddenly can’t get to a job or school — how does that help grow our economy?

Texas Appleseed, using data from the Insight Center for Economic Development, found that predatory lending had a negative economic impact of $87,578,235 for the Fort Worth-Arlington metro area in 2012-2014.

Because the Legislature has not had the political will to address this issue, 28 Texas cities have taken action themselves.

In North Texas, Dallas, Flower Mound and Denton have all passed ordinances limiting loan amounts and the number of times a loan may be rolled over.

This week, in a unanimous vote, the Arlington City Council approved a similar ordinance. I commend the mayor and council for taking action, because this ordinance will have a positive impact for my constituents.

There are more than 55 payday and auto-title lenders in the 11 ZIP codes I represent in Arlington and Grand Prairie. That’s a lot, but not atypical of the state as a whole; there are twice as many payday lending stores in Texas as there are McDonald’s restaurants.

Common-sense municipal ordinances have made a positive difference in the cities that have enacted them, providing needed consumer protections to their residents. This is definitely a step in the right direction, but more needs to be done.

First, the Legislature can no longer kowtow to the payday lending industry.

During the past few sessions, several pro-consumer bills have been proposed by members of both parties, only to be killed by the payday industry and their allies in the Legislature.

Voters need to demand that their legislators take action to rein in this usurious industry.

Second, people take out these loans because they have a financial need. There should be more support for lending alternatives with lower interest rates, which give borrowers the ability to pay down loan principle, help people build and improve their credit, and help families avoid an unending cycle of debt.

Several cities (including Dallas), nonprofits, churches, banks and credit unions are doing just that, but more is needed.

As Texans, we pride ourselves on a strong economy and the promise of opportunity to residents of the state.

But we undermine our economy and place limits on opportunity when we allow Texans to be entrapped by a predatory industry that is subject to no rules and has no accountability.

It’s time to change that.

State Rep. Chris Turner represents House District 101, which includes major portions of Arlington and Grand Prairie. chris.turner@house.state.tx.us