Abusive lending: reform needed now

Join the fight!

As many of you know, CitySquare, along the United Way of Metropolitan Dallas, Jewish Community Relations Council and Catholic Charities, has played a major role in curbing the abuses of payday and auto title lenders. Because of our efforts, the Dallas City Council unanimously adopted the most stringent ordinances in the country to regulate this industry. That ordinance has now been adopted by more than 33 different cities throughout Texas, including El Paso, Austin, Garland, Houston, San Antonio and Grand Prairie and there are other municipalities considering the Dallas ordinance. While we and our allies have not been quite as successful at the state level, we did get legislation requiring disclosure and reporting of these businesses which allows more opportunity to tell of the impact they are having on Texas families.
 
Now we have the opportunity to substantially impact the small dollar loan industry on a national level…
 
The Consumer Financial Protection Bureau, the federal agency which provides oversight over abuses in the financial industry, is taking comments from citizens throughout the country regarding their dealings with payday and auto title loans. These comments will be considered as the CFPB recommends to Congress federal legislation that will save the people we care about across the nation, from the debt trap caused by this type of predatory lending.  

What can you do?
If you, or anyone you know, have been victimized by payday or auto title lenders, tell your story! Write it down on this form and send it to United Way of Metropolitan Dallas Attn: Stephanie Mace 1800 N. Lamar St Dallas, TX 75202, or attach as PDF document and send it to DallasStopTheDebtTrap@gmail.com.
 
Check out this Payday Lending Alternative sheet, which is a resource provided by the Anti-Poverty Coalition with counsel for those may be going through hard financial times, along with a list of legitimate lenders who may be able to help.
 
Also, ask your neighbors, co-workers, or fellow community members if they have ever been ensnared in debt because of taking out a payday or auto title loan. If they haven’t, do they have a close relative or friend who may be in debt because of one of these loans.
 
Payday lenders are one of those businesses that help keep poor neighborhoods poor. People who take out these loans are not stupid, they aren’t lazy, they aren’t trying to get something for nothing. People who take out these loans are in desperate situations and get in trouble attempting to pay them back.  For so long, we were told that there was nothing that could be done. Now we have a chance to fight for those in poverty, our friends, and our families!
 
In this fight together!
 
Rev. Gerald Britt Jr.
Vice-President of External Affairs
CitySquare

Battle vs predatory lenders. . .

How a Texas Church Drove Out the Predatory Loan Industry     

For one Garland pastor, living out the gospel means collective political action.

 

Payday lenders have been having a tough time in Garland, Texas.

 

Their storefronts have closed, their gaudy signs spray-painted over in black. In recent months, about a third have left the city of 230,000, situated 18 miles northeast of Dallas.

 

Nobody could be more delighted at their demise than Keith Stewart, senior pastor of Springcreek, Garland’s largest church. Springcreek will not tolerate what Stewart calls the “predatory loan business.” Stewart estimates something like a third of his congregation of 1,700 have been put through the wringer after they (or their family members) secured loans with interest rates easily within the range of 200 to 500 percent.

 

Read more here.

Selling the poor, doing injustice

It’s been almost a year since the Consumer Financial Protection Bureau (CFPB) released their preliminary proposal to regulate payday and other small-dollar lending, and still consumers have no federal protections against predatory small dollar lending. So why hasn’t the CFPB taken action yet? One of the biggest factors has been the continuous and intense pushback from the payday lending industry — and Congress. While attacks on the Bureau by the industry and members of Congress are nothing new, what is new is that these attacks have recently started to come from both sides of the aisle. Even more surprising, members like Debbie Wasserman Schultz, Chair of the Democratic National Committee, are now working to block the CFPB from protecting consumers against predatory payday lending. The efforts by the chairwoman and a majority of the Florida congressional delegation have coalesced around H.R. 4018, the "Consumer Protection and Choice Act," which would not only delay the CFPB payday rules by two years, it would also endorse Florida’s debt trap payday model — which strips $280 million from lower-income Floridians — as a nationally recognized and federally exempted model for other states to implement. Consumers have waited long enough for the CFPB to act, and they’ve lost billions of their hard-earned cash in the process. Congress should not make them wait any longer and should let the CFPB finish the job it started. Tell Congress to reject this damaging bill: Got 1 Minute? Send a Tweet in support of the CFPB’s efforts (and tag your Representative so he or she gets the message!): Payday lending strips billions from financially vulnerable consumers each yr. Congress should let the @CFBP do its job to #StopTheDebtTrap. [Click here to tweet] We need strong a @CFPB rule to protect against predatory payday lenders taking advantage of consumers. #ConsumersCantWait #StopTheDebtTrap [Click here to tweet] 250+ groups oppose HR4018, which would limit the @CFPB's ability to protect consumers from #payday lending: www.bit.ly/1RoyIiY [Click here to Tweet] Got 3 Minutes? Call your U.S. Representative and tell them to reject this damaging bill: Call 202.224.3121 and ask to be connected to your Representative's office. If you don't know who your Representative is, find out here. Once you're connected, here's what to say: My name is [your name] from [your organization or coalition], and I’m calling to request that you oppose H.R. 4018, as well as any effort to weaken the CFPB’s ability to protect consumers against predatory payday lending practices. This bill would codify a number of payday industry-backed practices and recognize Florida’s industry-backed payday lending model — which strips $280 million from lower-income Floridians — as one that other states should follow. H.R. 4018 would harm consumers across the country and would undermine the CFPB’s ability rein in an industry that thrives on stripping financially vulnerable borrowers of their hard-earned money and trapping them in a cycle of long-term debt. Thank you for everything that you do on behalf of consumers everywhere. Sincerely, Corporation for Enterprise Development The Assets &Opportunity Network team   CFED - Corporation for Enterprise Development   1200 G Street, NW Suite 400   Washington, DC 20005   202.408.9788

 

Payday loan oppression

Can you imagine taking out a $500 loan and it costing more than $1100 to pay back? FACT: Every day in our area, many of our neighbors are doing just that and paying up to 484% in interest and fees on small, short-term "payday" loans. This is completely legal in our state, and as a result, payday and auto-title lenders are making billions of dollars while preying upon people in dire need of financial help to pay their rent, to feed their children, and to fix their car so that they can get to work. FACT: According to Texas Appleseed, in the Fort Worth-Arlington area, 105 cars are repossessed per week as a result of auto-title loans. That's nearly 5,500 cars per year and an equal number of families, single parents, senior citizens, and others who may permanently lose their vehicle for being late on one payment, sometimes by a matter of minutes, even though they've been paying back a 300% interest loan on time for months. FACT: Due to inaction by the state legislature to regulate these predatory lenders, many cities have passed meaningful reforms to protect their citizens.  To date, 26 Texas cities, including Dallas, San Antonio, Houston, Austin, Corpus Christi, Amarillo, El Paso, Flower Mound, and Denton, have passed ordinances limiting loan amounts and the number of times a loan may be rolled over. Right now, Arlington is considering becoming the first Tarrant County city to add their name to this list.  FACT: There are several things that you can do to help be a part of the solution. First, if you or someone you know has been a victim of predatory lending, let us know. Call my office at 817-459-2800 or click here to send me an email. We want to know how these loans are personally impacting Texans and trapping people in a cycle of debt. Second, if you live in a city not on this list contact your local leaders and ask them to support a payday lending ordinance in your community. Third, make your voice heard on this issue. Write a letter to the editor, call your legislator, tell your friends. This is a serious issue, the impact of which goes far beyond those who take out the loans. In fact, the Texas Catholic Conference has estimated that 30% of charitable assistance goes to help those in trouble with payday or auto-title loans and that predatory lending has a negative economic impact of $87,578,234 in the Fort Worth/Arlington area alone. FACT: Federal regulations are being proposed, but they will not fully address the problem. Next month, the Consumer Financial Protection Bureau (CFPB), the federal agency with oversight over predatory lenders, is expected to release new proposed regulations. These rules have become a common talking point among those who are opposed to state or local regulation -- they often point to impending action by the federal government as a reason not to pass state or local laws.  Prominent organizations across our state, like the Texas Catholic Conference, the Baptist General Convention's Christian Life Commission, and Texas Appleseed, agree that these rules will not replace local ordinances, but serve to complement these existing laws. It's also critical to point out that the timeline for implementation of federal rules is unclear. My office has been in contact with the CFPB and has been told that it will like take about two years for rules to go into effect; this of course assumes that implementation is not halted by industry lawsuits or a new administration.  Predatory lending is an issue that impacts us all. Even if you have never taken out a loan, somewhere down the line, through the need for more charitable contributions or as a result of the strain on local economies, you're going to pay a price. It's time we help our neighbors and time we act on their behalf. Please, tell us your story, contact your elected officials, or write a letter to the editor. Whatever you do, don't sit on the sidelines and let these predatory lenders trap more of our neighbors in a never-ending cycle of debt. Chris P.S. If you'd like to join our Texas 101 Payday Lending Task Force, click here.

 

Garland adopts strong payday lending regs

(Earlier this week the Garland City Council adopted Dallas' "Model Ordinance" to regulate payday lending in that city.  This makes the 16th city to provide protection to its citizens.  Below you will read the rationale behind the ordinance.  Thanks to CitySquare's Public Policy efforts led by Rev. Gerald Britt and supported by Keilah Jacques.)

GENERAL TALKING POINTS

PAYDAY & AUTO TITLE LENDING ORDINANCE      

These are the key messages we, as a coalition, will use to advocate consistently for the Model City Ordinance.  Please utilize these key messaging points to ensure we all stay on message and deliver a powerful, consistent message to City Council.

Key Messages for City Council Visits:

Ø  Garland’s citizens deserve the same protections as other major Texas cities, including Dallas, Austin, Houston, El Paso, and San Antonio (now totaling 14 statewide).  I am here today to ask for your support of a strong ordinance modeling other major cities in Texas ordinances on payday and auto title lending.

o   In 2005, Garland had 18 payday and auto title lending storefronts and it has grown by around 40% to a total of 32 storefronts in 2014.

Ø  Adding Garland to the list of cities with strong payday and auto title ordinances will add to the push for statewide reform.  

Ø  High cost payday and auto title loans damage our city and citizens by:

• exacerbating already desperate financial circumstances of the borrowers.  Payday and auto title loans often lead to further financial distress for borrowers—statewide 35,000 cars were repossessed in 2012 due to auto title loans. Loss of transportation for Texans can mean loss of employment further compounding a desperate situation.
• having a payday loan increases borrowers’ risk of having their bank account involuntarily closed and nearly doubles borrowers’ chances of having to file for bankruptcy.
• draining nonprofit resources and undermine investments in family financial stability.  A 2012 Texas survey found 32% of nonprofit clients seeking financial assistance were in trouble with a payday or auto title loan.
• diverting critical business tax revenue away from our city. It is estimated that Garland loses approximately $1.2 million in sales tax revenue each year.  Currently, payday and auto title lenders are draining approximately $14.1 million a year from our local economy in fees alone.  This is on top of the actual loan amount! 

Ø  Payday and auto title lenders take advantage of unfair market competition.  While they are not regulated at all, less expensive options available to consumers are regulated.  Why should payday and auto title lenders be exempt from any time of regulation or oversight?

Ø  Local advocates stand united with advocates across the state on passing the Model Payday Ordinance.   Listed below are its main provisions, for reference, if needed.

1.      Require Credit Access Businesses to obtain a valid certificate of registration from the City of Houston annually.

2.      Limit payday loans to 20 percent of the borrower's gross monthly income.

3.      Limit auto title loans to the lesser of 3 percent of the borrower's gross annual income or 70 percent of the vehicle value.

4.      Limit loans to no more than four installments or three rollovers or renewals (a rollover or renewal is defined as an extension of consumer credit made within seven days of the previous extension of credit).

5.      Require the proceeds from each installment or renewal to reduce the loan principal by 25 percent.

6.      Require that every contract be written in a language the borrower can understand, or be read in its entirety to any borrower who cannot read.

7.      Require the lender to provide to the borrower a form created by the City which references non-profit agencies that provide financial education and agencies with cash assistance programs and contains general information regarding extensions of consumer credit.

Ø  We urge your support for the Model Payday Ordinance so that:

• We can limit the costs to the City through lost sales tax revenue and unfair market competition
• We can limit the costs to our families through high cost, predatory products providing protections against predatory practices.
• Garland can join other cities as a united front in sending a strong signal to state legislators that predatory practices must stop.

 Potential Questions and Answers:  These are potential questions and positions you may hear when discussing the Garland ordinance. 

1. I don’t want a Lawsuit.

If the ordinance is going to be meaningful and contain strong consumer protections, you will be sued by the industry.  Enshrining the status quo only sanctions predatory practices and allows more borrowers to be trapped in a cycle of debt.  In addition, Dallas defended the suit in house and has temporarily won the lawsuit. 

2. I believe in a Free Market

• We also believe in a free market and do not wish to push the industry out of business.  However, as things stand currently:  Banks, credit unions, credit card advances, pawn shops and finance companies are lenders that follow state rate and fee caps for consumer lending and serve sub-prime customers.^[1]   These alternative products are regulated, unlike Payday and Auto Title lenders.  This sets up unfair market competition.

3. The city does not have the budget for enforcement.

• Enforcement is a tricky issue and we suggest that you turn for advice and suggestions from other cities that have passed ordinances.  A suggestion is to work in enforcement and its issues into the ordinance.

4. There aren’t enough votes on City Council.

• We are here to assist you in working with your fellow council members.  We have many advocates from the business community, over faith leaders, and non-profits all willing to assist you in this effort.

5. Businesses will just move outside of Garland.

• We agree, but we need to begin somewhere.  We are also willing to assist our outlying communities with education and ordinance language to broaden the scope and impact of a strong consumer ordinance.  Garland itself is becoming a haven for lenders due to the restrictions in Dallas—that is why it is up to cities like Garland to form a unified front in helping economically vulnerable citizens.  Garland passing the Model Payday Ordinance is key; if Garland goes a down a different path from the other cities, we will weaken our position during the next legislative session, leaving room for the industry to pass weak regulation that will pre-empt all of the cities’ stronger ordinances.

6. Aren’t these the only option for people that just need a small loan?

• No, they are not.  Less expensive options include finance companies, pawn shops, credit card cash advances, credit unions and banks.  However, each of these alternatives is regulated, including pawn shops.  Why should all of these options be regulated, while payday and auto title lenders do business without any regulation?

7. Won’t this ordinance cause these lenders to go out of business?

• No.  Lenders still have flexibility and can charge the same fees (along with the interest that goes to the third party lender).  We are just asking that borrowers have the ability to pay off the loan within a reasonable time frame. 

8.  Why can’t we just wait for the Texas Legislature to provide regulations?

• To pass meaningful regulation, the Legislature needs political will—something that is provided when cities unite in passing a uniform ordinance regulating payday and auto title lenders.  The next legislative session is a year away and even given real reform, in the meantime, many Garland residents will become trapped in the cycle of debt.  An ordinance with real reforms to these predatory products can help borrowers sooner. 

---

[1] Texas Office of Consumer Credit Commissioner list of 342 E and F lenders, October 2012.  Texas Office of Consumer Credit Commissioner list of licensed pawn shops, August 2013.

More work to be done: payday lending

Payday Lenders Move Loans to Avoid Law

As I've noted on this page in the past, Rev. Gerald Britt leads the way in the public policy work orchestrated by CitySquare.  Among the issues we've tackled is the impact of payday lenders on low-income persons and households. 

Earlier this year the Dallas City Council, led by Council Member Jerry Allen, passed two of the most restrictive payday lending ordinances in the nation.  We are most grateful for Mr. Allen's leadership on this crucial issue.

Now, to avoid compliance with the new laws, payday lending companies are moving their loans into suburban offices where the limits on operations are not yet in place. 

You will be able to view a report by WFAA Channel 8 on the issue and recent developments here or in the frame below. 

The fight continues!

Sharks in the water!

Yesterday's editions of The Dallas Morning News published this opinion essay from the paper's editorial staff. It is gratifying to see the work of CitySquare's public policy team and those of our growing number of partners have good results in affecting public values and opinion. Much work remains to be done on the issue of predatory lending, but we're making progress! Thanks, Gerald and team for your hard work.

I've posted the editorial statement below.

Editorial: It’s time for tighter oversight of payday lenders

08 July 2012 10:38 PM

The free-enterprise advocate in us says that payday lenders should operate wherever the market takes them. It’s a business, after all. If people don’t want the product they sell, the market will show them the exit door.

The problem is that quick-cash lenders don’t operate under normal market conditions. Their market, in fact, operates exactly the opposite — enticing desperate people away from what should be their very first option, economizing in every way. When you are short on money, you buy cheaper food, find a lower-rent apartment.

Banks make their services scarce for people in trouble. There’s no cheap, off-brand place to shop. For many consumers, the only choice is to seek out a title lender, who will accept a car or house title as collateral on a short-term, high-interest loan. Like a shark hunting wounded prey, the companies profit by exploiting the customer at his weakest moment.

Texas, which has some of the loosest regulations in the country for payday and title lenders, is witnessing an explosive expansion of these businesses. Oversight is nowhere near what it should be as some lenders charge usurious amounts. Effective rates of 300 percent or more are common, and when the customer can’t pay, his car or house becomes the lender’s property.

In a recent study by Texas Appleseed and the Anti-Poverty Coalition of Greater Dallas, 37 of the 241 short-term lenders in the city were surveyed on their effective rates and the legally required loan information they make available to clients. As Gerald Britt Jr., vice president of public policy at CitySquare, noted on our Viewpoints page last week, 41 percent of outlets surveyed did not abide by legal requirements and offered misleading information about the risks of quick-cash loans.

They get away with it because lawmakers who seek tighter oversight run into an extremely well-funded lobby. Quick-cash lenders donate heavily to politicians and intimidate city governments with the threat of expensive litigation.

Fort Worth-based title lender Cash America International is the No. 1 contributor to Dallas GOP Rep. Pete Sessions. Rep. Jeb Hensarling, R-Dallas, ranks No. 10 in the House for contributions from the payday loan lobby, according to OpenSecrets.org.

The industry donates generously to Democratic and Republican legislators alike at the state level. Dallas Mayor Mike Rawlings previously sat on the board of directors of Ace Cash Express and has defended such services as necessary, particularly in southern Dallas, to serve the “under-banked.”

What about protecting the over-exploited? As this newspaper noted in a Points special section last October, there is a lopsided presence of quick-cash loan shops in the poorest neighborhoods of southern Dallas and an unusually strong concentration of these loan shops in Dallas’ biggest crime hot spots — both north and south. We do not need more of them.

If legislators won't to stand up to this powerful lobby, reject their donations and impose tougher regulations, the least Dallas and other local governments can do is ensure that existing laws are enforced vigorously.

Stop treating the financially vulnerable as shark bait.

Follow the money

A sampling of campaign donations by members of the quick-cash loan industry from 2008 to present:

Recipient / Donor / Amount

Rep. Pete Sessions, R / Cash America Int’l / $37,500

Rep. Jeb Hensarling, R / Cash America Int’l / $24,500

State Rep. Helen Giddings, D / Cash America Int’l / $5,750

State Sen. Royce West, D / Cash America Int’l / $5,000

State Rep. Raphael Anchía, D / Cash America Int’l / $3,500

State Rep. Marc Veasey, D / Cash America Int’l / $2,500

Texans for Joe Straus / Ace Cash Express / $34,000

Texans for Rick Perry / Ace Cash Express / $22,000


Mexican-American Legislative Caucus / Consumer Service Alliance of Texas* / $20,000


Texans for Greg Abbott / Ace Cash Express / $12,500

SOURCES: Federal Election Commission, Texas Ethics Commission

Payday lenders strike back

The following news story in the aftermath of CitySquare's success in advocating for substantive changes in city ordinances regulating payday lending among poor, laboring communities. 

The fight has just begun, or so it would appear!

Lawsuit Filed Over Dallas Payday, Title Loan Rules
By Ken Kalthoff
Friday, Jul 15, 2011

A trade group representing payday and car title loan stores filed a lawsuit Friday to block regulations approved by the city of Dallas in June.

The Consumer Service Alliance of Texas claims the city rules violate state law and improperly restrict loan choices that should remain available to customers.

"We have no other option but to sue the city of Dallas to protect the interests of North Texas consumers who are best served when they are given a variety of realistic credit options and trusted to make financial decisions based on what's best for them and their families," CSAT President Alex Vaughn said in a press release.

The Dallas City Council approved the rules June 22 after the Texas Legislature decided against statewide restrictions on the high interest and fees the stores charge.  "They chose to take a very limited action, and we chose to do the most we can at our city level," Councilman Jerry Allen said when the city rules were
approved.

Allen, a former banker, testified in favor of stronger payday loan regulations at hearings on the proposed state law in Austin this year.  When drafting the Dallas ordinance, city lawyers decided restrictions on the
amount of interest rates and fees could only be determined by the state.

But Dallas did require lenders to set up payment plans that actually reduce the principal amount of the loan and not just roll over fees.
And the city rules also require registration and record-keeping on borrowers and lenders, which is similar to rules state lawmakers chose to impose statewide.

"This new, egregious Dallas ordinance conflicts with current law because it duplicates financial data collection requirements, limits access to credit for Dallas customers and restricts the terms under which loans may be
repaid," Vaughn said.

City officials could not be reached for comment late Friday, but Allen said in June that he expected a legal challenge and that the city's measure would survive.

"This is as strong a teeth that we can put into this, and it sends a message that we will not tolerate our citizens being taken advantage of," he said.

Economic fragility...financial stress expands

My friend, Jeremy Gregg, Executive Director of the PLAN Fund here in Dallas, reminded me of a Dallas Morning News report that the "average Dallas poor family" spends $800 annually on check cashing and payday lending.  Based on the report below, I expect many other families are forced to use the incredibly expensive financial services as well.  It was a big win on Wednesday when, thanks to the efforts of CitySquare and our partners, the Dallas City Council approved new zoning regulations as a means of beginning to regulate payday lending operations in Dallas.  Read the report and tell me what you think.

Nearly Half of Americans Are ‘Financially Fragile’
May 23, 2011, 2:22 PM ET

Nearly half of Americans say that they definitely or probably couldn’t come up with $2,000 in 30 days, according to new research, raising concerns about the financial fragility of many households.

Many Americans aren’t able to cope with an unexpected bill.  In a paper published by the National Bureau of Economic Research, Annamaria Lusardi of the George Washington School of Business, Daniel J. Schneider of Princeton University and Peter Tufano of Harvard Business School used data from the 2009 TNS Global Economic Crisis survey to document widespread financial weakness in the U.S. and other countries.

The survey asked a simple question, “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?” In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable. The $2,000 figure “reflects the order of magnitude of the cost of an unanticipated major car repair, a large copayment on a medical expense, legal expenses, or a home repair,” the authors write. On a more concrete basis, the authors cite $2,000 as the cost of an auto transmission replacement and research that reported low-income families claim to need about $1500 in savings for emergencies.

Financial fragility isn’t limited to low-income groups. “Households with socioeconomic markers of vulnerability (income, wealth, wealth losses, education, women, families with children) are more likely to be financially fragile, and substantially more so,” the authors write. “The more surprising finding is that a material fraction of seemingly ‘middle class’ Americans also judge themselves to be financially fragile, reflecting either a substantially weaker financial position than one would expect, or a very high level of anxiety or pessimism. Both are important in terms of behavior and for public policy.”

Lusardi, Schneider and Tufano also looked at the ways in which people coped with an unexpected expense. Most would use multiple methods ranging from dipping into savings, asking for help from family and friends, using loans or credits cards, taking out payday loans or selling possessions. “Taken together with those who would pawn their possessions, sell their home, or take out a payday loan, 25.7% of respondents who were asked about coping methods (equal to 18.6% of all respondents) would come up with the funds for an emergency by resorting to what might be seen as extreme measures,” the authors write. “Along with the 27.9% of respondents who report that they could certainly not cope with an emergency, this suggests that approximately 46.5% of all respondents are living very close to the financial edge.”

Meanwhile, Lusardi, Schneider and Tufano also looked at how different countries compare. They consulted with local partners to set the number used in local currency at a comparable level. “Perceived capacity to cope with an emergency is lowest in the U.S., U.K. and Germany, all countries in which 50% of households or more would probably or certainly be unable to come up with the emergency funds,” the authors wrote. “France and Portugal occupy an intermediate position; 46% of respondents in Portugal would certainly or probably be unable to come up with the funds as would 37% of those in France. The highest levels of coping capacity are found in Canada (28% certainly or probably unable), Netherlands (27.9%), and Italy (20%).”

Update on payday lending regulation

CPPP APPLAUDS BIPARTISAN EFFORT TO REFORM

PAYDAY AND AUTO TITLE LENDING

(AUSTIN, Texas) Center for Public Policy Priorities released the following statement regarding payday and auto title lending bills moving through the Texas House of Representatives.

Over the past several years, unregulated and high-cost, short-term lending has taken a toll on Texas consumers and communities. Without state oversight, Texas consumers do not have basic protections against abusive lending practices or a way to escape the cycle of debt which traps Texans with unlimited fees. The 82nd Legislature has a unique opportunity to address these problems by enacting House Bill (HB) 2592, 2593, and 2594.

We strongly urge the 82nd Legislature to enact meaningful short-term lending reform to create “rules of the road” and provide basic protections for Texans and their communities.

To read the full statement and to discovery exactly what each of the three bills accomplish click here.
CONTACT

Brian Stephens
512.320.0222, ext. 112
512.565.0506 CELL

Update from Texas House on Payday Lending legislation

Rev. Gerald Britt, CitySquare's VP of Public Policy and Community Program Development, has been working hard for changes in the payday lending laws in Texas and in Dallas. 

One outcome of his vision and hard work was a visit to CitySquare last Friday by Elizabeth Warren, Assistant to the President and Special Advisor to the Secretary of the Treasury. 

Another result is documented in the press release below that was issued by Texas state Rep. Rafael Anchia and Rep. Marc Veasey on Friday.  The progress is not all that we hoped, but a step in the right direction.  And, the effort is not complete, as the legislation must come to the full House for a vote and work must be done on the Senate side to get a new law. It is important that we express our concerns to our representatives and to our Senators here in Texas about this important issue. 

For Immediate Release:
April 8, 2011

Payday Lending Bills Pass Out of Committee

Bills do not address all concerns with payday lenders, but represent improvement from current law.

AUSTIN -- On Thursday, April 7th, the House Committee on Pensions, Investments, and Financial Services unanimously approved House Bills 2592, 2593, and 2594, by Rep. Vicki Truitt (R-Southlake). These bills create a system of regulations for payday lenders, who currently are subject to very little state oversight.

At the outset of the legislative session, State Rep. Rafael Anchia (D-Dallas) and State Rep. Marc Veasey (D-Fort Worth), who serve on the committee, had hoped for stronger regulation. Both representatives authored or co-authored bills that would have provided for more restrictions on payday lenders. Those bills would have restricted the lenders' ability to roll over past due balances into new loans, charge exorbitant interest rates, and saddle consumers with unexpected debt.

“This bill, although not perfect, brings significant new regulation to an industry that, until now, has been free to operate in Texas with very little oversight,” Rep. Anchia said. He added, "Significantly, the Office of the Consumer Credit Commissioner now has the power to move against the bad actors in the industry on behalf of consumers who look to the state for much-needed protection from predatory lenders."

Despite their preference for stronger legislation, Rep. Anchia and Rep.Veasey voted in favor of the payday lending bills. They feel that the legislation provides as much protection and regulation as possible while ensuring that the bills can obtain the support of the majority of the Legislature. Both representatives believe that the need for regulation of payday lending is too pressing to delay by waiting for more perfect legislation.

“Although I wish that we could pass a bill that would do more to protect consumers, I support this legislation because I believe it is the most we can accomplish this session, and it represents a significant improvement over current law,” Rep. Veasey said.

State Representative Rafael Anchia is currently serving his fourth term in the Texas House. He is the vice-chair of the Pensions, Investments, and Financial Services Committee, and also serves on the Land and Resource Management Committee. Residents of District 103 are encouraged to contact Rep. Anchia at (512) 463-0746.

State Representative Marc Veasey is serving his fourth term in the Texas House. He is a member of the Elections; Pensions, Investments and Financial Services; and Redistricting Committees. Residents of District 95 are encouraged to contact Rep. Veasey at (512) 463-0716.

Payday loans. . .local action now!

Even though the state battle to provide more robust regulation of the payday lending industry is about over, a very important local effort is still very much in play.  Read what follows and then take personal action to help in our efforts to protect our low-income neighbors.

STOP PREDATORY LENDING IN DALLAS

Predatory lending is a big problem across Dallas. In recent years, the number of auto title and payday lending locations has exploded and now over 200 storefronts exist within the city.

Payday and auto title lenders have found a loophole to escape state licensing and are “legally” able to charge outrageous rates, trapping many people in cycles of debt while draining community resources. The Texas Legislature must ultimately act to regulate these lenders so that their practices are fair and reasonable; however, since there is a heavy concentration of these locations in Dallas neighborhoods – particularly in areas already struggling economically -- the Anti-Poverty Coalition of Greater Dallas is calling on the City of Dallas to take action and reduce the negative impact of these lenders through a strong zoning ordinance.

These loans create a treadmill of debt. Few borrowers can repay the loan in full, plus interest, and pay for other monthly expenses. Thus, borrowers must to re-borrow, or “rollover”, the loan in order to fill the gap in their budget created by their loan. None of the rollover payments apply towards the loan principal, so the cost to borrow the money frequently exceeds the original loan principal. Over half of payday borrowers rollover at least once before they pay the loan off – and nearly one in four borrowers rollover loans multiple times.

The average payday borrower pays $840 for a $300 loan. 

Because payday loans are secured by a borrower’s post dated check, payday lenders can hold borrowers’ bank accounts hostage.

If the borrower cannot pay in full or the exorbitant fee to rollover the loan, they will face heavy charges from both the payday lender and from their bank in overdraft charges.

Fees for a one-month $4,000 auto title loan exceed $1,000. This $1,000 fee must be paid every month until the loan is paid in full, or a missed payment can result in repossession of the car.

Last year, nearly 200,000 vehicle liens were filed in Texas by unlicensed auto title lenders.

TAKE ACTION

Contact your State Senator and Representative to tell them that you support Texas regulating payday and auto title lenders.

Sign the petition asking the City of Dallas to enact an ordinance to lessen the concentration of payday and auto title stores and reduce their harmful impact on our neighborhoods.

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THE ANTI-POVERTY COALITION OF GREATER DALLAS

The Anti-Poverty Coalition of Greater Dallas is a new coalition that seeks to move 250,000 people out of poverty permanently by 2020 by coordinating efforts to keep people from falling into poverty and increasing pathways out of poverty. We are a broad-based coalition that unites the business community, faith-based organizations, social service agencies, and foundations. Join our fight today!

Action Alert- Call Your State Representative Today!

From Texas Appleseed and the Anti Poverty Coalition:

Today, the House Pensions, Investments, and Financial Services Committee will be hearing  bills related to payday and auto title lending. HB 410, HB 656, HB 661, and HB 1323 are identical bills that close the loophole in Texas law that permits 500% interest rates (and higher) on payday and car title loans. In Texas, there are more than 3,000 of these high cost lenders operating through the loophole.

TAKE ACTION!

Now is the time to let the committee members know that you want them to support the four bills that close the CSO loophole (HB 410, HB 656, HB 661, and HB 1323 ) and that 500% interest rates hurt families and hurt communities. The only true solution to this abuse is to close the loophole, which the state legislature must do. State legislators are hearing lots from the payday and auto title industry and their army of lobbyists, so now they must hear from you.

Let them know TODAY that you think 500% interest is wrong and the state must close the loophole by passing HB 410, HB 656, HB 661, or HB 1323. 

Each phone number begins with (512) 463.  The remaining numbers are listed next to committee member's names: 

Rep Vicki Truitt 0690
Rep. Rafael Anchia 0746
Rep. Charles "Doc" Anderson 0135
Rep. Brandon Creighton 0726
Rep. Ana Hernandez Luna 0614
Rep. Ken Legler 0460
Rep. Barbara Nash 0562
Rep. Rob Orr 0538
Rep. Marc Veasery 0716

To find out which State Senator represents you click here.