COMMITTEE HEARS BILLS TO REGULATE PAYDAY LENDERS
|Senator José Menéndez of San Antonio authored one of the three payday lending bills before the Business and Commerce Committee Tuesday.|
(AUSTIN) — Three bills aimed at reining in what supporters believe are unfair lending practices by so-called payday lenders were in front of the Senate Business and Commerce Committee on Tuesday. Critics of these lenders say that they offer unreasonable terms that trap borrowers in an inescapable cycle of debt paying exorbitant fees and interest payments. "Currently there are payday lenders charging rates of over 500 percent and borrowers are expected to pay the full sums of those loans within two weeks," said San Antonio Senator José Menéndez.
Witnesses testified that legislative efforts to regulate the industry date back to the 1990s. After the Legislature put payday lenders under the same interest and fee restrictions as commercial banks in 2001, lenders reorganized as credit service organizations, which allowed them to escape fee regulation. Though they cannot charge more than ten percent interest on loans, there are no restrictions on fees. Further testimony showed that short-term payday or car title loans in Texas come with many more fees than in other states. Ann Baddour of Texas Appleseed told senators that a two-week loan of $500 comes with an average of $115 fees in Texas. That's compared to $55 for the same loan in Florida and $65 in Oklahoma. She attributed it to a lack of a regulatory framework in the state. Senator Royce West of Dallas said that there are more than four times as many payday loans issued in Texas than commercial loans.
The bills considered Tuesday target various issues associated with payday lenders. SB 1323 by Menéndez would categorize fees offered by payday lenders as interest for purposes of usury laws. SB 92 by Senator Rodney Ellis of Houston includes more regulations. It would limit loans to twenty percent of a borrower's gross monthly income. Auto title loans would be limited to the lesser of three percent of the borrower's annual income or 70 percent of the vehicle's value. The total number of loan payments would be limited to four, and each payment would apply towards a quarter of the loan principal. The third measure, SB 121 by Dallas Senator Royce West would limit to three the number of times a loan can be refinanced, limit the maximum term of a loan to 180 days and preserve the power of cities to regulate local payday lending practices. All three bills remain pending before the committee.
Also Tuesday, the conference committee on the state budget began public meetings. That's the group made up of five members from each chamber that will hammer out the differences between the House and Senate versions of the budget. Senate Finance Committee Chair Jane Nelson said both versions fund the same priorities and include significant tax cuts. "These budgets have much more in common than they do in conflict and I am confident that we can work out the differences and pass a budget that will make Texas proud," she said. The two budgets are already fairly close together according to Legislative Budget Board Director Ursula Parks, with only a $1.6 billion difference in all funds. That is a less than one percent difference in total funds, but there are differences in where that money is spent. The committee will negotiate these differences and then present a product for final approval to each chamber before the session concludes June 1st.
The Senate will reconvene Wednesday, April 29 at 11 a.m.