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Several cities across the state of Texas have asked the Legislature to regulate the increasing number of businesses making short-term loans. The cities include Dallas, Midland, El Paso, Lubbock, San Antonio and Houston.
In passing resolutions similar to the one unanimously approved by the Lubbock City Council two months ago, these municipalities argue that such business, which is usually known as payday lenders, prey on people with financial difficulties. Most of them charge up to 500% interest rate annually if the loan is not repaid on time.
It appears that these concerns are being listened to by lawmakers.
The House Pensions, Investments & Financial Services Committee on Tuesday heard a long list of complaints regarding an industry that have been characterized by critics as predatory. Furthermore, a couple of legislators explained how the bills they filed this legislative session would institute control over the industry in favor of the consumers. This group of legislators is headed by Tom Craddick, the former House Speaker of the Texas Legislature.
Craddick, a Republican from Midland, said that his House Bill 410 would essentially regulate an industry that has so far managed to avoid state oversight. “They are functioning with a loophole that we created in 1997,” said Craddick. There is no legal limit on the amount of fees they can charge.”
Because this industry is mainly unregulated, borrowers who take out a $300 loan for an average of 14 days but is unable to repay it on time can end up paying $840.
Democratic Representatives like Eric Johnson of Dallas, Eddie Rodriguez of Austin and Joe Farias of San Antonio, also filed bills similar to the one filed by Craddick. “This is not about getting anybody out of business,” Eddie Rodriguez said of his HB 661. “It’s about fairness. Let’s be as fair as possible to our low-income consumers.”