Critics Point To Lower Fees In Other States, Seek More Controls
San Francisco, CA -- (SBWIRE) -- 10/17/2012 -- State Consumer Credit Commissioner Leslie Pettijohn recently reported 1.1 million Texans received payday loans or car title loans with a total value of $1.3 billion in the first half of this year. Texas payday loans averaged $471, with most lenders charging between $20 and $29.99 per $100 borrowed.
The report was mandated by the Texas legislature in its most recent session in a law putting Pettijohn's office in charge of licensing and supervising those lenders; it did not cap loan interest rates. The report also stated Texas has registered 3,280 lenders, with 200 more applications pending.
Some critics of the industry want a ceiling on interest rates and additional controls. A senior analyst at the Center for Public Policy Priorities in Austin claims the average loan fee in Texas is the nation’s highest. Don Baylor, calling for further regulation of payday and car title lenders, says Texans “are paying on average 50% more than consumers in other states for the same product and the same companies,” adding the reason lenders in the Lone Star State charge more is “Simply because they can charge that here."
Compared with what he says is Texas’ average $22 per $100 fee, Baylor notes Alabama has capped rates at $17.50, Oklahoma has set a $15 ceiling for fees on for loans under $300 and $10 for loans between $300 to $500, and Florida has adopted a $10 fee cap.
Critics, including a religious groups coalition, also fault Texas for not restricting how often a loan can be renewed, saying repeated rollovers of an initial loan may trap borrowers in poverty. The Consumer Credit Commissioner’s latest report shows payday loans in the state are on average refinanced 2.5 times, and car title loans once.
A payday loan industry trade group, however, points to its new guidelines freezing interest and fees and creating an extended payment plan for any loan which has been rolled over four times.
The guidelines, which took effect at the end of September, also set a limit the amount of any single loan to 35% of the borrower’s income, or 70% of the vehicle’s value in car title loans, and require lenders to offer multiple repayment plans reducing principal owed in equal amounts. Mandatory auditing by independent firms is another element of the guidelines developed by the industry group.
The Texas legislature may revisit the issue when it reconvenes in 2013. San Antonio recently became the third city in the state – after Austin and Dallas – to adopt its own limits on payday and car title loan amounts, fees and rollovers, although the industry has gone to court to challenge the measures adopted by the first two cities.
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