Everything is bigger in Texas, including the percentage of people who utilize payday loan services. According to a 2011 PEW study, Texans are among the demographic with the highest payday loan borrowers, with 8 % of the geographical populace patronizing these high-interest loan lenders; Texas is a permissive state when it comes to payday lending practices, allowing lenders to charge interest rates of up to 391%.
The same study suggests that in restrictive states, states that impose regulations on lending practices such as interest rate caps and zoning laws that limit the amount of onsite lenders, payday loan reliance is dramatically reduced. Furthermore, unlike restrictive states, Texas law does not require a cap on the amount an individual can borrow from a payday loan lender, leading to a cycle of extreme loan dependence and recurrent debt.
Unsurprisingly, many Texans are fed-up with opaque lending practices and things are starting to change in the Lone Star state. With new regulations curbing the growth of payday loan lending stores and businesses, Texans are taking a stand against deceptive and costly payday advance practices.
Last year, the Texas government enacted two new laws that required state licensing for payday loan lending providers and made the fees and interest rates associated with these loans more transparent to consumers; however, the law did not actually cap the interest rates and fees nor limit the amount one can borrow, a lack of regulation that is being questioned by many city council members across Texas.
In Texas, APRs of over 10 % are illegal, but loopholes in the law have made it possible for payday advance providers to charge significantly more. State law allows lenders to by-pass the limit on interest rates by registering as a credit service organization-an organization that supposedly helps improve a consumers credit score. Those is favor of more regulations hope to eliminate these types of loopholes in order to protect consumers. The city council has been joined by religious organizations and individual citizens in the fight for fair lending practices.
While the city cannot change the laws in terms of interest caps on its own, it can make it more difficult for payday lenders to thrive within city limits. After facing opposition from lobbyist at a state level, city council members in many of Texas' major metropolitan areas, have authorized zoning ordinances that obstruct the growth of payday loan lending businesses. Although Texas lobbyists are busily opposing these new municipal ordinances, filing lawsuits and attempting to block city progress, the city governments are taking the issue into their own hands.
While Texas is not the only state attempting to regulate loan lending, they are at the forefront of enacting regulation at a municipal level. If they are successful, it could mean that other cities follow suit to help eliminate payday loan reliance. Such a move could have serious implications for the loan lending industry.
Yet, not all are on board for more regulation. Individuals and groups alike have resisted the city councils moves to restrict payday lending, noting the benefits of having such services available. Many citizens appreciate the availability of these services for emergency relief and argue for free-enterprise over government regulation. The resistance is so strong that the municipal ordinances may be removed from the legislature by next year.
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