Legislators and Lobbyists Have Killed Meaningful Payday Lending Reform

Categories: Biz, Legislature

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There remains a pressing need for meaningful, statewide regulation of payday lending in Texas, since the industry has shown a willingness and ability to skirt restrictions passed by Dallas, Austin, and other cities.

Those reforms look like they are still at least a couple of years off. Despite high hopes for a slew of bills aimed at reining in the industry's more blatantly usurious practices, the one that has gotten the most traction, Dallas Senator John Carona's SB 1247, has had its teeth yanked.

Carona's bill was never perfect. It was particularly criticized for stripping municipalities of the authority to pass stronger regulations, and it didn't place a hard cap on interest rates. But, as the Texas Tribune reported this morning and the Texas Observer noted last week, the bill's most meaningful provisions have been seriously watered down.

Specifically, the bill's five-day waiting period between loans, an attempt to limit fees and interest paid by borrowers, was reduced to two. And the provision that capped the size of payday loans at 15 percent of monthly income for those making less than $28,000 per year and 20 percent for those making more was doubled. The allowable loan size in the new version of the bill are 30 percent and 40 percent, respectively.

There's really no secret as to how all this happened. The industry has deep pockets and doesn't hesitate to dig into them to further its interests. The watchdog group Texans for Public Justice released a report last week
announcing that "predatory lenders" have given $2.3 million to state lawmakers this session.

Carona admitted as much when he presented his weakened legislation at committee. "You have to get the most you can get with the political support that you have," Carona said, according to the Texas Observer. "This industry is in business and this industry has amassed enormous political support at the Capitol."

Consumer advocates are dismayed. "It's kind of akin to putting a 75 mile-per-hour speed limit on a residential road," Don Baylor, a senior policy analyst at the liberal Center for Public Policy Priorities, told the Texas Tribune. "You can say it's a limit, but it's not going to make anybody safer."

Two days ago, Rev. Gerald Britt of CitySquare took to the Morning News opinion page to suggest ways to add teeth back into the legislation. He suggested reducing loans to no more than 10 percent of a person's monthly income, impose a 180-day limit on loans, include fees when calculating how much a borrower can take out, and make the waiting period a full week.

Sensible proposals, all of them. Unfortunately, they won't happen. Not this year at least.

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This would have been better if the legislators had aimed to build up a consensus on these topics since the simple discussions would not be enough on this subject. There is a growing need to legislate the businesses of payday loans so that people can get benefits of their services rather making these loans controversial.


So TDMN and the Observer wants to restrict the average person's ability to get a loan.  God knows the big banks won't loan you money.  They would rather use the cheap Fed money to buy US debt for a small but very low risk investment.  Besides Helicopter Ben would yank their ability to get the money if they actually loaned it out like it was originally meant to be used.  No one is forcing anyone to take a loan out.  The higher the risk, the higher the interest rate.   It is called free enterprise, you might have heard of it.  So what is next?  You would think the nanny state would go after the credit card interest rates, but then credit card companies own the nannies just like the Fed owns the credit card banks.

Believe it or not, some people get loans with no intention to pay them back.  Yes, really!  I know it is hard  for libtards to understand finance, after all it is about money and libtards think it grows on trees.  But the payday loan people have to charge more for their money because they don't get free money from the Feds like the big banks do and they have to absorb the freeloaders that will not pay back the loan.  If it were possible to make the loan at a lower rate someone would and make a bunch of money doing it.  You know, it is that free enterprise thing libtards have a hard time understanding.


Until the Credit Service Organization (CSO) loophole the payday lenders operate under is closed, no legislation will make much difference. Tom Craddick had a good bill that did this last session, but Vicki Truitt, who chaired the Committee that bill went to, killed it and substituted her own destined-to-do-nothing trio of watered-down bills. The Industry's lobbyists were swarming all over any proposed Payday Lending reform  the last two sessions. . Dallas' TV stations now neglect covering the Capitol during session--too expensive, they say--so we never see this stuff. Maybe it's time for some good FCC license challenges!

everlastingphelps topcommenter

Are the criminal loan sharks paying off the Observer or something?  I've never seen someone try so hard to push poor people towards the kneecappers.

TheCredibleHulk topcommenter


The payday lenders are the equivalent of an un-fenced pool or a ladder left standing against a building with nobody around. I think the legal term is attractive nuisance. If there were a fence, or no ladder, nobody would be swimming or climbing where they ought not be doing so, and therefore wouldn't hurt themselves.

Rather than helping people that are in dire straits financially, the usurious interest rates and penalties charged by these institutions get a good many people farther into debt, thereby exacerbating our overall societal debt problem along with their own financial problems.

I'm generally all for free market solutions to our various problems, but humankind discovered a long time ago that usury was bad for everybody, not just the folks foolish enough to get themselves in too deep.

These businesses are not just a symptom of our financial problems, they actually accelerate the rate at which we are collectively burying ourselves in debt. You personally may not even be a customer, but they hurt you, nevertheless.

TheCredibleHulk topcommenter


I'll bet a good percentage of the folks that make use of these lending services wouldn't borrow that money if the only other option were "kneecappers".

Anyway, kneecapping is far from the only way to make life difficult and unpleasant for a delinquent borrower. Hell, I'd rather nurse a shattered kneecap if the alternative was having to put up with bill collectors.

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