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Limited Payday-Lending Regulation Bills Passed By Senate
May 24th, 2011
On Monday the Texas Senate approved two measures designed to regulate the state’s payday lending industry for the first time, without ending the industry’s controversial lending practices.
A modest step
Sen. John Carona, R-Dallas, said his legislation is a modest step but it will still require more than 3,500 storefront payday offices to obtain a state license and to disclose full information about their fees to customers.
The ‘cycle of debt’
The legislation does not address the so-called ‘cycle of debt’, the period when consumers extend their short-term loans, on average a dozen times, racking up heavier fees. Instead, the measures leave the industry’s fees unregulated. “What we present to you today is the limit of what we could do,” Carona said. “I leave this session disappointed that we’re not able to do more.” There was little real debate in a chamber that was half-empty at times, and Carona urged senators not to offer any amendments.
The Senate approved
The Senate overwhelmingly approved House Bills 2592 and 2594. The votes were 27-3 and 28-2, respectively. The House must approve Senate changes before the measures can go to the governor for ratification. “Amending these delicate bills in any fashion would probably cause it not to pass the House,” Carona warned. Both bills were the result of negotiations between the industry and consumer groups.
Another bill
Sens. Wendy Davis, D-Fort Worth, and Royce West, D-Dallas, had written a bill with tougher regulations, including a cap on fees, but they couldn’t get their colleagues to agree to bring it up for debate. Davis blamed the power of the industry’s lobby for watering down the legislation. She said, “It’s very disappointing. “It makes you lose your faith in democracy.”
Military families
Federal law caps fees to military families at 36 percent a year, but that limit has not been enforced in Texas. Carona’s legislation is supposed to change that, but Davis said the inclusion of installment loans in the new legislation would allow the industry to circumvent that fee cap.
Summarizing
Wendy Davis said, “We’ve actually taken some steps backwards.”
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