Limited payday-lending regulation bills passed by Texas Senate

Payday lonas storefront

Payday loan regulation passed by Texas Senate. / Image: swanksalot/Flickr/CC BY-SA

Two measures designed to regulate the payday lending industry were passed by the Texas Senate for the first time on Monday. Reactions to the legislation have been mixed; supporters call it is a good start, and critics say it does not go far enough.

Bills are both passed by large margins

Both bills, 2592 and 2594, were the result of negotiations between the payday loan industry and consumer groups.  The bills passed the Senate vote by a large margins.  Bill 2592 passed 27-3 and 2594 passed 28-4.

New bills require fee disclosure

The legislation, proposed by Sen. John Carona, R-Dallas, requires short-term lenders to obtain a state license and to disclose information about their fees to their customers.

Fees remain unregulated

Those fees, however, will remain unregulated. “What we present to you today,” said Sen. Corona, “is the limit of what we could do. I leave this session disappointed that we’re not able to do more.”

Critics want the ‘cycle of debt’ to be addressed

Some say the bills are merely token efforts, claiming that the proposed legislation does not address what has been called “the cycle of debt.”  This refers to borrowers who extend their short-term loans multiple times, leading to heavier fees.

Previous bill

A previous bill written by Sen. Wendy Davis, D-Fort Worth, and by Sen. Royce West, D-Dallas, called for much tougher regulation.  That bill required a cap on fees, but never made it to the floor for debate.

Federal law requires fee caps at 36 percent a year for military families.  That limit, however, has not been enforced in Texas.

Davis calls legislation ‘disappointing’

Davis claims the legislation was diluted by lobbyist for the payday loan industry.  “It’s very disappointing,” she said. “It makes you lose your faith in democracy.”

House still needs to approve the bills

The House must approve Senate changes before the measures can go to the governor.



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