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Texas Payday Lenders Face New Rules, Scrutiny
Texas Tribune 1/5/12
Texas Payday Lenders Face New Rules, Scrutiny
Payday lenders are about to come under the microscope.
New laws aimed at curbing predatory lending take effect this week, meaning payday and auto title loan businesses will have to be licensed by the state and post a schedule of fees in a visible place, similar to the overhead menus seen in fast food restaurants.
Proponents of the new regulations passed by lawmakers during the 2011 session say they're needed because the practice of offering short-term, high-interest loans to consumers has led thousands of Texans into a cycle of debt and dependency. Lawmakers heard horror stories about consumers being charged interest rates in excess of their initial loans.
Absent these regulations, the number of payday loan businesses in Texas has more than doubled, from 1,279 registered sites in 2006 to more than 3,500 in 2010. Opponents say this industry has flourished because of a 1997 law intended to give organizations flexibility to help people repair bad credit. A loophole allowed payday lenders to qualify, giving them the freedom to operate without limits on interest rates.
Though the new laws took effect on Jan. 1, state regulators have been working for months to finalize the language of the rules, and businesses are in the process of coming into compliance. Eventually, lenders will be required to disclose more information to their customers before a loan is made, including the cost of the transaction, how it compares to other types of loans and interest fees if the payment is not paid in full.
Texas Payday Lenders Face New Rules, Scrutiny
Payday lenders are about to come under the microscope.
New laws aimed at curbing predatory lending take effect this week, meaning payday and auto title loan businesses will have to be licensed by the state and post a schedule of fees in a visible place, similar to the overhead menus seen in fast food restaurants.
Proponents of the new regulations passed by lawmakers during the 2011 session say they're needed because the practice of offering short-term, high-interest loans to consumers has led thousands of Texans into a cycle of debt and dependency. Lawmakers heard horror stories about consumers being charged interest rates in excess of their initial loans.
Absent these regulations, the number of payday loan businesses in Texas has more than doubled, from 1,279 registered sites in 2006 to more than 3,500 in 2010. Opponents say this industry has flourished because of a 1997 law intended to give organizations flexibility to help people repair bad credit. A loophole allowed payday lenders to qualify, giving them the freedom to operate without limits on interest rates.
Though the new laws took effect on Jan. 1, state regulators have been working for months to finalize the language of the rules, and businesses are in the process of coming into compliance. Eventually, lenders will be required to disclose more information to their customers before a loan is made, including the cost of the transaction, how it compares to other types of loans and interest fees if the payment is not paid in full.
This won't rein them in enough. It's just showing them a collar, but it least it is a start. Pay day loan lenders are some of the absolute worst criminals in finance.
2 replies
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= new reply since forum marked as read
When you top this off with the recess appointment of Mr. Cordray, the first Director of the Consumer Financial Protection Bureau, I think consumers will be better informed in the future.
Every journey begins with the first step 
The only way we make any progress in Texas is to have the Feds enforce it from the top. Sad but true.
back at ya!
