There remains a pressing need for meaningful, statewide regulation of payday lending in Texas, since the industry has shown a willingness and ability to skirt restrictions passed by Dallas, Austin, and other cities.
Those reforms look like they are still at least a couple of years off. Despite high hopes for a slew of bills aimed at reining in the industry's more blatantly usurious practices, the one that has gotten the most traction, Dallas Senator John Carona's SB 1247, has had its teeth yanked.
Carona's bill was never perfect. It was particularly criticized for stripping municipalities of the authority to pass stronger regulations, and it didn't place a hard cap on interest rates. But, as the Texas Tribune reported this morning and the Texas Observer noted last week, the bill's most meaningful provisions have been seriously watered down.
Specifically, the bill's five-day waiting period between loans, an attempt to limit fees and interest paid by borrowers, was reduced to two. And the provision that capped the size of payday loans at 15 percent of monthly income for those making less than $28,000 per year and 20 percent for those making more was doubled. The allowable loan size in the new version of the bill are 30 percent and 40 percent, respectively.
There's really no secret as to how all this happened. The industry has deep pockets and doesn't hesitate to dig into them to further its interests. The watchdog group Texans for Public Justice released a report last week announcing that "predatory lenders" have given $2.3 million to state lawmakers this session.
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Carona admitted as much when he presented his weakened legislation at committee. "You have to get the most you can get with the political support that you have," Carona said, according to the Texas Observer. "This industry is in business and this industry has amassed enormous political support at the Capitol."
Consumer advocates are dismayed. "It's kind of akin to putting a 75 mile-per-hour speed limit on a residential road," Don Baylor, a senior policy analyst at the liberal Center for Public Policy Priorities, told the Texas Tribune. "You can say it's a limit, but it's not going to make anybody safer."
Two days ago, Rev. Gerald Britt of CitySquare took to the Morning News opinion page to suggest ways to add teeth back into the legislation. He suggested reducing loans to no more than 10 percent of a person's monthly income, impose a 180-day limit on loans, include fees when calculating how much a borrower can take out, and make the waiting period a full week.
Sensible proposals, all of them. Unfortunately, they won't happen. Not this year at least.