Texas Senate Committee Passes Payday Lending Bill Following much debate, the
Texas Senate Business and Commerce Committee has passed legislation restricting the availability of short-term credit by capping interest rates and fees on
payday loans and car title loans.
The legislation, presented by Senators Wendy Davis and Royce West, passed with a vote of 5-1 even though both sides had their supporters. In order to alleviate some concerns voiced by the payday lending industry and the
Consumer Services Alliance of Texas, the two senators modified certain aspects of their original bill.
By placing cash advance lenders and auto title lenders under the same regulations as banks and credit unions, the bill limits fees on the loan to 15% and prohibits loans in excess of 35% of the borrowers’ income. The bill also limits the amount of loan rollovers a customer can receive on a loan and requires lenders to offer repayment plans to customers who are struggling to repay their loan.
The bill, however, does not place an interest cap, like in most states that have passed payday advance laws.
In the meantime, Representative Vicki Truitt, Chairwoman of the House Pensions, Investments and Financial Services Committee, is supporting three bills that would increase regulation and call for more stringent disclosures.
All these bills are aimed at closing a perceived loophole that allows payday lenders to operate without oversight or regulation.
Payday loan lenders are not the only ones whose pocket books are hurting as a result of the new bill. Following the passing legislation, three major Texas-based payday loan companies have already seen their shares drop in value. Investors and shareholders watched their investments drop by around 5%, expecting to see a reduction in profits as a result of the passed legislation.
A survey taken by the AARP suggests that two-thirds of Texans agree with passing legislation to regulate short-term credit lenders.