Will lawmakers finally rein in payday lenders?
Dont count on it. For years, the payday lending industry has fought efforts by state lawmakers to bring reasonable oversight to this seamy underbelly of consumer finance. The Chronicles Lise Olsen outlines the scope of the problem in todays paper:
More than 17,000 Texans lost their cars and trucks in the first half of 2012 after failing to make payments to storefront short-term lenders many of whom charge fees equivalent to 500 percent annual interest, consumer data shows. Unlimited payday and car title loan charges are legal in Texas and often the only means for some consumers to obtain quick cash. The services are wildly popular: 3,300 lenders pumped an estimated $800 million into the Texas economy by funding often desperate debtors needs for quick cash in the form of microloans ranging from about $400 to $1,000, according to lenders reports from January through June.
But most Texas payday and auto title loan customers cant afford to repay high-cost loans on time and can quickly end up stuck with renewal fees that exceed the amount of the loan, data collected under a new state law shows. About 83 percent of customers in Beaumont and 75 percent in the Houston and San Antonio metro areas are locked in a loan renewal cycle, latest lender reports show.
While some progress was made in the last legislative session to increase the oversight of the industry, none of the reforms addressed the biggest problems with payday lending: collection practices and rollovers the repeated extensions of loans that generate big fees for the lenders and drive the borrowers ever deeper into debt. The states rules for payday lenders dont even meet the minimum standards set by the industrys own trade group.
Lawmakers who want to make big changes face an uphill battle, in part because any bills introduced have faced intense industry lobbying and staunch opposition from Rep. Gary Elkins, R-Houston, who owns a payday lending business.
Payday lending is inherently predatory, but it does serve a need. That why the state should have laws that ensure borrowers understand the consequences of the terms to which theyre agreeing. The last time around, the state was able to get laws passed that allowed for the collection of accurate data on payday lending. Thats shown the scope of the problem. This session, its time for the Legislature to take some meaningful action.
http://blog.chron.com/lorensteffy/2012/11/will-lawmakers-finally-rein-in-payday-lenders/