Texas Eyes Changes to Payday Loan Regulations
Short term loans are incredibly helpful to anyone in a pinch. However, some borrowers struggle to understand the terms of service and sign paperwork without understanding how interest is accrued or the potential risks. As a result, Texas is starting to take a closer look at products like payday loans. The House Committee recently held hearings regarding Texas payday loan regulations.
Testimony revolves heavily around a woman who took out a car title loan in Texas. She understood she would be making monthly payments, but she was apparently less aware of the interest rate. After paying back more than $2,000, she still owed $1,500 and had to turn to her church for financial help.
Representative Tom Craddick of Midland is one of the leaders trying to pass a bill that regulates interest rates on short-term loans in Texas. According to Craddick, interest rates in Texas are higher than in any other state. He and others feel the interest rates need to be capped.
Some Cities Are Already Cracking Down
Other cities are starting to crack down. Close to two dozen towns or cities have created ordinances that better regulate payday and auto title loans in Texas. Lenders who operate within these areas must keep careful records of the amount borrowed, the interest and fees that are charged, and that clients have been offered referrals to companies offering information on getting out of or avoiding unnecessary debt.
Despite these changes, some question if it is really the government’s concern. Comments made during a House Investments and Financial Services Committee hearing quite simply stated that people who take out these short-term loans are not being forced into it. It is the borrower’s decision and not something the state should be sticking their nose in.