A coalition of lawmakers, led by State Rep. Mike Villarreal (D-San Antonio) today urged the Texas Legislature to approve tough new restrictions on so called 'payday' or 'title' loan companies, 1200 WOAI news reports.
"It is time for this Legislature to protect consumers from the cycle of debt," Villarreal said today. "It's time. We need to do this now."
A 'payday' lender is a company which makes small, short term loans, mainly to customers who cannot borrow from a traditional back due to bad credit. The name comes form the necessity of some customers to take out the loans to cover emergency expenses until the following payday. The standard payday loan fee is $17.50 per every $100 borrowed, which works out to about 900% a year interest.
A 'title' lending company will make the same type of loan, but will hold the borrower's vehicle title as collateral.
Villarreal says the measures in question would limit the number of times a loan could be 'rolled over,' or renewed, with interest and fees piling up.
"It limits the number of rollovers, requiring lenders to offer a consumer an extended payment plan," Villarreal said. "The bill limits the types of payday loan products that can be offered in the state."
The lenders have been accused of 'preying' on low income Texans, charging ever increasing fees on 'roll over' loans.
The payday lending industry says it is providing a needed service to low income people who couldn't get a loan any place else, and they say new restrictions which forced them out of business would leave the 'un-banked' with even fewer options.
The City of San Antonio has already passed a series of restrictions on payday lending.