Predatory lenders are lurking just around the corner. (But help may be on the way.)

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It’s a safe guess that at a strip center near you there is the backlit sign of a company offering easy, quick, short-term loans. Payday Loan, as the shady business is called, is one of the fastest growing businesses in Texas, with more outlets than McDonald’s and Whataburger combined.

And oh, what a profit margin. Due to a legal vacuum, these predatory lenders are free to charge interest rates that banks and credit unions cannot dream of, rates that would make Tony Soprano blush. These days, the average credit card charges an annual percentage rate (APR) of around 15%; a credit card for people with lousy credit, 25 percent. But an average payday loan reaches 300%. In Texas, the average borrower takes a $ 300 loan and repays $ 840.

And that’s just the average. Sometimes the APR reaches 500%; sometimes it goes even higher. And auto title loans, akin to payday loans, are even more ruinous – the financial equivalent of crack. These two nasty cases encourage a small, short-term cash flow problem – a medical bill, an unexpected car repair – to escalate into a full-blown crisis, forcing families into bankruptcy or asking groups for help. nonprofit and churches.

Such high interest rates shouldn’t be legal in Texas.


In the Texas legislature, several identical bills were introduced to close the loophole and limit payday lenders to less crippling rates – up to 135% APR. The idea unites politicians who are generally worlds apart: Supporters range from Rep. Tom Craddick, a pro-business Republican from Midland, to Rep. Eddie Rodriguez, a Democrat from Austin who prides himself on being a consumer advocate. and the poor.

Outside the legislature, an equally broad coalition supports this change: among its fans are AARP Texas; United Way; Good will; the Texas Catholic Conference; the Texas Baptist Christian Life Commission; and Texas Appleseed, a public interest law center. San Antonio city councils in Lubbock have passed resolutions urging Lege to close the loophole. Nationally, even the Pentagon has tried to fight payday loans; because they wreak so much havoc on military families, they are a defense problem.

But will Texas take action? Maybe, maybe not. Payday lenders are backing a powerful army of lobbyists – “It’s like a full employment law here in Austin,” says one observer – and in the last session of the legislature, these lobbyists succeeded in blocking a similar legislation even before it hits the ground.

This time around, the industry shills are already claiming that in reality these super high interest loans are not predatory. Spokespersons say payday loans actually help cash strapped people, that they make credit available to people who might not otherwise be able to get it, that their high APRs are justified by their rates. high fault.

This garbage is suspiciously similar to what we’ve heard from another group of predatory lenders: the ones who brought us the housing crisis.

Next to is possible for customers of payday lenders to find much better alternatives. The Center for Responsible Lending suggests taking out loans from banks or credit unions; enter into payment agreements with creditors; request an advance from your employer; turn to church emergency aid programs; or even get a cash advance on a credit card. (Yes, the 30% APR on a cash advance is high, but it’s still ten times better than a payday loan.)

Payday loans destroy lives. And Texans don’t need it.

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