Lawmakers in Austin have placed a target on payday loan businesses. A very small target.
Sen. John Corona, R-Dallas, has introduced Senate Bill 1247 to make some changes to payday operations and the power of cities to control them, but at least one Denton man is saying it’s not nearly enough to curb what has become a serious, life-changing problem.
Also, Rep. Mike Villarreal, D-San Antonio, filed identical legislation — HB 2706 — to address payday and auto title lending reform.
“The bill is really trying to deal with a lot of frustration from community nonprofits and local governments about proliferation of payday loan lenders and title loan lenders,” said Pat Smith, a board member of the United Way of Denton County and a staff member at Denton Bible Church. “At the same time, the industry has been resisting reform and has hired about 120 lobbyists to help in Austin.”
SB 1247 puts some measures in place to eliminate the perpetual nature of the loans, ensure the loan size corresponds to a customer’s income or vehicle value, create more transparency and lets the people who get these loans know exactly what they are getting themselves into and extend payment plan provisions.
The bill did not put any limits on fees and interest rates, which are about 600 percent in Texas right now, Smith said.
The bill also has language that would limit the cities abilities to police the loan businesses in their communities with pre-emption. Cities like Dallas, Austin, El Paso and most recently Denton have passed some ordinances to help curb some of the problems that come along with loan companies, but officials are worried the pre-emption measures in the bill would neuter those ordinances.
Smith and Joe Ader, pastor of the Village Church, ventured to Austin on Tuesday to testify before the Texas Senate Business and Commerce Committee about the effects of predatory lending on the community. They both addressed the Denton City Council on Tuesday night as well.
Smith said he was there to testify as both a member of the Denton Bible Church and a board member of the United Way of Denton County.
“We see this as a moral issue.” Smith said. “We see charging the poor as a sin. There are several passages [about it] in the Old Testament and it is spoken to in the New Testament. My point was while interest and loans are moral, exorbitant interest is not. More needs to be done.
“From a legal perspective, I argued it was wrong for the state to infringe upon a municipality to control development and allow a business that has a perpetual product that harms citizens to operate without restriction.”
Smith said the room was packed with close to 80 people and many others standing outside watching the proceedings. But, Smith said, Corona made it clear there was no political will in Austin to do any significant reform.
“His point was trying to reach the best possible solution, which is an improvement but is still woefully inadequate to the realities on the ground,” Smith said.
In an e-mailed statement about the payday and title loan issues, Sen. Jane Nelson, R-Flower Mound, said the issue received a great deal of attention in the last legislative session.
“And the Legislature approved legislation to provide better safeguards for Texans who engage in these type of loans,” she wrote. “There are some who would like to see that law expanded, and proposals to do that are under consideration in the committees that oversee financial institutions. Although I do not serve on those committees, I am monitoring their deliberations.”
Rep. Myra Crownover, R-Denton, said she has received contributions from individuals who are involved in short-term lending.
“However, I have never accepted, nor will I ever accept, donations from any person or group who has any expectation of influence on my responsibilities as a legislator,” she said.
Crownover said the payday lending industry, like every industry, has good actors and bad actors and she believes regulation of the industry is needed to address abusive practices.
“I am aware of multiple pieces of legislation to address payday lending, including legislation filed by Rep. Tom Craddick,” she said. “I will be tracking this legislation as it moves through the committee process, and I hope that we will have substantive legislation to eliminate abusive practices within the industry.”
Craddick filed HB 2019, which would place limits on fees and interest for consumer loans.
District 106 Rep. Pat Fallon, R-Frisco, and District 63 Rep. Tan Parker, R-Flower Mound, could not be reached for comment.
Even with elected officials’ statements on the matter, Smith remains skeptical.
According to a Texas for Public Justice report released March 18, elected officials have received about $4 million from donors with interest in the loan industry.
“The credit-access businesses have done a good job of getting legislators to back them,” Smith said.
“We might get some improvement and transparency of loan terms, but other than that, I doubt we will get anything else meaningful from Austin. The votes will go where the money is and the money is with the businesses.”
BJ LEWIS can be reached at 940-566-6875. His e-mail address is firstname.lastname@example.org .