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.

Sources

American-Statesman

Financial Blog

Seek4News

The Texas legislature is considering three bills to regulate payday lending in the state. Image: Flickr / criminalintent / CC-BY-SA

In the Texas legislature, three new bills intended to limit payday lending are under consideration. One, House Bill 2592, has passed easily. Another is expected to come up for vote today and pass, and a third may or may not make it to the House floor.

Agreed upon legislation

Two of the three pieces of proposed regulation in the Texas legislature are “agreed upon” pieces of legislation. This means that the industry, consumer advocates and some legislators agreed on the legislation. House Bill 2592 passed 123 to 23 in a voice vote. This bill mandates more conspicuous disclosures of the fees and interest rates of the loans that payday lenders offer. House Bill 2594, which requires additional licensing of all storefront locations, is held up in parliamentary debate. The expectation is that HB 2594 will pass when it reaches the house. These two bills are supported by much of the industry, though one payday lending store owner who is a member of the House argued against the bills, saying they were an attempt to push out small business owners.

Controversial legislation to limit payday loans

Unlike HB 2592 and HB 2594, HB 2593 is considered controversial. HB 2593 would place specific limits on the total amount of loans that could be offered to customers. The bill would also limit the number of times a loan can “roll over.” HB 2593 is buried relatively deep in the legislative list, and unless the Texas House addresses it by midnight tonight, it will have to be moved to the Senate or re-introduced next year. The legislative session ends on May 30. Any bills passed by the House today will have to go on to the Senate, be reconciled and then sent to the Governor for his signature, veto or tacit approval.

The question of fee disclosures

The one bill that has already been passed by the Texas legislature requires extensive disclosures. One Texas legislator went undercover in several payday loan stores and reported that only one of the eight stores he visited had conspicuous displays of fees. The legislator did not indicate whether he had been given fee disclosures when receiving the loans.

Source

Texas Statesman

Businesses hoping for SBA loan help may be left out in the cold. Image: Flickr / MoneyBlogNewz / CC-BY

The Small Business Administration has finally come out with the rules for a heavily anticipated new lending program. The program is supposed to offer help to businesses facing foreclosure of their buildings. The restrictions on the loans, however, are cutting out most businesses that could benefit.

New SBA lending program

In January of this year, businesses and business loan advisers started looking to the Small Business Administration for lending program rules. The program was passed by Congress in 2010, and the SBA has been working on implementing the rules since then. On Thursday, Feb. 24, the rules were officially announced. The program will offer new loans for businesses with mortgages coming due within the next 24 months and will cover underwater mortgages. However, the owner of the business will be required to put 10 percent of the loan amount on the line in cash or equity of another property.

Concerns about limitations of SBA program

The SBA lending program is intended to help businesses on the brink of foreclosure. Business watchers, however, are concerned that the limitations of the lending program could cut out so many businesses that it will be practically ineffective. The rules cut out businesses that already have short-term SBA mortgage loans, businesses that do not have enough equity or cash for the down payment and businesses that cannot pay the additional 1 percent fee. The SBA claims that these restrictions are to ensure that businesses that are truly on the edge of shutting down, but viable, get the most help first.

Opening up small business loans

Getting small businesses the help they need to stay open is a tricky challenge, especially because payday loans are generally too small to help businesses. Some businesses are going to fail, bad economy or not. Sorting out which businesses in Irving, Texas or Anywhere, USA, have a chance of succeeding is the first challenge. Ensuring that the government doesn’t loan $15 billion to businesses that can’t pay it back is also tough. The hope is, though, that the SBA is able to offer help without cutting legitimate businesses in need.

Source

LA Times

Check cashing services are often grouped with payday lenders, but they're not the same thing. Image: Flickr / livenature / CC-BY-SA

The Texas legislature is currently hearing testimony on proposed legislation that would affect credit services. The payday loan bill would reclassify payday lenders, title lenders and check-cashing services. Legislators have said they are looking to negotiate the details.

Texas payday lending regulations

Under current Texas law, payday lenders, check-cashing services and title lenders operate as “credit service organizations.” This is a business classification that was originally intended for businesses that help customers get out of debt. Credit service organizations are not subject to limitations on the interest rate they charge. Instead, CSOs are asked to pay just a licensing fee of $100 per year.

Searching for the regulatory sweet spot

Initially, the bills presented in the Texas legislature would have essentially shut down payday lending, check-cashing and title lending in Texas. Reclassifying payday lenders and forcing them to operate under usury laws would force them to charge no more than 36 percent APR. Because most payday loans have a term of two weeks, charging a 36 percent annual interest rate would put lenders out of business because this amount is not enough to support their businesses. Legislators pointed out that these lending businesses do provide a service that is needed, as evidenced by their heavy use. Sen. John Carona has called it a “gold rush,” stating that the lenders are “entitled to make a profit,” but he feels it shouldn’t be a usury-level profit.

Differentiating credit products

Though the Texas legislature is grouping payday lenders, title lenders and check-cashing businesses, these are three very different businesses. Payday lenders offer a short-term loan, secured only by a promise to pay on the next payday. If the loan isn’t paid back, the lenders have little recourse. Title lenders offer loans secured by a car title. This means if the loan isn’t paid, the lender takes possession of the vehicle. Check-cashing services cash checks for customers that cannot or do not want to go into traditional banks for their financial services.

Sources

Dallas News
Payday Lending Statistics report

Small businesses are waiting for regulations to be written so they can apply to refinance their property. Image: Flickr / MoneyBlogNewz / CC-BY

The process of putting a new law into practice can sometimes take a while. A new two-year Small Business Administration program is taking longer than usual. With one-quarter of the available time already gone, the program has yet to get rules or a process.

SBA refinancing program

During late 2010, a new Small Business Administration refinancing program was passed by Congress. The program was intended to last two years. The program would support the refinancing of business property debt. Small businesses are facing balloon payments on the relatively short-term loans on their businesses. The refinancing program would help remove balloon payments and reduce mortgage payments for struggling businesses. The program is written to last for 24 months only.

Waiting for new rules on refinancing

The 24-month SBA refinancing program has been law for the last six months. In those six months, however, the SBA has not yet written rules for the program. The rules and regulations for the program must be written before loans can be offered. Even though the rules and regulations for the program have not yet been written, the two-year clock on the program has already started running out. This means that once rules are written, the program could only have 16 months to distribute and back loans. While business leaders have indicated they appreciate the SBA taking time to write the regulations right, they are also frustrated with the quickly expiring timeline.

Businesses already applying

Though the Small Business Administration has yet to trip the switch on the refinancing program, businesses are applying. Everywhere from Baltimore, Md., to San Fransisco, Calif., businesses are turning in applications. These “conditional” applications cannot be approved until the SBA writes regulations for who may or may not qualify for these loans. These applications will be processed first when the loan rules are finally written.

Source

Knox News

The Small Business Administration is starting two new programs intended to increase small loan lending. Image: Flickr / MoneyBlogNewz / CC-BY

On Feb. 15, the Small Business Administration will be expanding lending programs. Small Loan Advantage and Community Advantage are both programs aimed at increasing lending to very small businesses. Both programs increase the percentage of the loan the government will guarantee.

SBA’s Small Loan Advantage program

The Small Business Administration is a government-supported program intended to help small businesses grow and expand. Many small businesses that have been asking for less than $250,000, however, have had trouble finding banks willing to lend to them. The amount of time, money and effort it takes to underwrite an SBA loan doesn’t feel “worth it” for banks to lend to small businesses. The Small Loan Advantage program will guarantee 75 percent of loans up to $150,000 and 85 percent of loans between $150,001 and $250,000. The hope is that these guarantees will encourage large banks to make small loans to businesses.

Community Advantage through the SBA

The SBA 7(a) Community Advantage program is aimed at increasing the number of lenders that serve minority and underserved groups. The program will certify “mission-focused community institutions” as SBA lenders. The goal of this new program is to create new lending institutions that are not traditional banks. Groups in Texas, Louisiana and other traditionally under-lent groups are targeted. The SBA will start accepting applications for these “community institutions” on Feb. 15.

The basics of SBA lending

SBA lending, through the traditional program, Small Loan Advantage or Community Advantage, is a facet of traditional lending. Banks underwrite the loans and distribute the loans the same way they would traditional loans. The difference is that the federal government backs these loans, meaning that they can be as easy as bad credit loans or no fax payday loans for some businesses.

Sources

Biz Journals
Business Wire

Texas is rolling its federal debt into the private market - but does this solve problems, or create them? Image: Flickr / MoneyBlogNewz / CC-BY

Unemployment is high, and with up to 99 weeks of benefits available, states have paid out a lot. The federal government has provided loans to most states to fund unemployment benefits. The interest payments on those loans are coming due, and some states are seeking creative solutions.

Federal unemployment loans

In order to keep unemployment benefits flowing, the federal government provided loans to states such as Texas. The loans did not require any interest payments for several years. However, the interest payments are now coming due on these loans. These payments add up to as much as $10 million to cover interest on the loans. The federal government waived interest on these no credit check loans for two full years, but the interest-free period expired on Dec. 31 of 2010.

Texas payments on unemployment loans

The federal government provided what amounted to payday loans no faxing to the states. The agreement included a clause that states would be required to start making interest payments as of 2011. Though Congress has considered bills to extend this no-interest period, they have no passed. Idaho, Texas and several other states have not necessarily been able to make these payments. Rather than going into debt, which state law does not allow for, they are rolling the debt into private market loans. That means investors will pay off the federal government, but the states will be on the hook for more money, for longer.

The commercial municipal debt market

Municipal bonds and municipal debt are a large private market. When states, counties and cities are in need of credit, they sometimes go to private debt markets. In Texas and Idaho, these no-credit loans have been rolled to the private market. The states will not have to make a $10 million payment to the federal government. The states, however, will be required to make smaller payments over a longer amount of time, which will add up to a higher payment in the end.

Sources

ProJo
Slate

The Texas budget has some huge holes that will be tough to plug. Image: Flickr / calsidyrose / CC-BY

In accordance with Texas law, the Texas legislature will consider a proposed budget for the 2012-2013 year. The budget contains severe cuts across the board. The budget comes close to making up a $15 billion shortfall, but may not go far enough.

The Texas budget shortfall

This year, the Texas legislature will have to find places to cut $15 billion. Some economists estimate that the “true” shortfall of the Texas budget could be up to $27 billion, once increasing costs of Medicare and school enrollment are taken into account. The Texas constitution dictates that the budget must be balanced, which means that the budget shortfall has to be made up with a combination of cuts and new income.

The new cuts on the Texas budget

Many of the cuts proposed in the current Texas budget are the equivalent of short term loans. The amount of money Texas will pay to Medicare providers will be reduced by 10 percent or more; health insurance for children will also be cut. Over the long term, this will reduce the number of medical providers willing to take Medicare. The budget proposal also cuts four community colleges, as well as all financial aid for new students. The Department of Criminal Justice, including prisons, would also be cut by 14 percent. State contributions to the employee retirement fund would be reduced to the point the fund could not maintain itself. About 9,600 state jobs would be eliminated in the budget, as well.

New fees in the Texas 2012-2013 budget

In addition to cutting billions of dollars out of education, health care, and retirement, the Texas budget also looks for emergency money in new fees. Tobacco users on state health insurance will be required to pay $30 a month. The state will also start charging a “monthly child support processing fee,” and “annual child support service fee” to those who are paying child support. An electronic filing-of-documents fee is expected to generate about $1 billion in revenue as well.

Sources:

KFDM
Washington Post

Though they consider it a payday loan to the budget, legislators may approve gambling in Texas. Image: Flickr / jimg944 / CC-BY

There is a new Texas legislature convening soon. This legislature will be facing a huge budget deficit. Casino interests are trying to get the legislature to allow casinos in the state to give a short-term loan to the state budget.

Texas gambling interests

Lawmakers in Texas are going to be convening their new session in just a few weeks. The legislature will be facing a budget deficit of $20 billion or more. While meeting in Fort Worth, lawmakers will have to increase revenue or decrease spending through program cuts — neither of which are going to be easy or popular. Gambling interests are trying to get the legislature to legalize gambling within the state as a way to meet that budget deficit.

Previous attempts to legalize Texas gambling

Lawmakers have considered legalizing gambling within Texas state lines before. Last time, gambling interests tried to push through a bill that would have legalized gambling within the state. Despite a rider that would have devoted gambling revenue to college scholarships, the bill was soundly defeated. Many lawmakers say that casinos are more than a short term loan to the budget. Some consider casinos and gambling to be a payday loan that has to be paid back with increases in law enforcement and social services.

How Texas gambling would work

If the Texas legislature passes a bill to legalize gambling, it would not happen immediately. First, the Texas constitution would have to be changed. Second, a significant amount of gambling revenue would be earmarked as a way to help fund higher education. Third, gambling would be put up for a public vote, and would likely be limited to individual municipalities, such as Irving and Tarrant County. Lobbyists are unsure whether the Texas gambling bill will make it through the legislature, but the desperate need of short term loans for the budget may give it a better chance of passing.

Sources

Miami Herald

The death penalty is one of the more polarizing topics of our time. (Photo Credit: CC BY-SA/World Coalition Against the Death Penalty/Flickr)

The constitutionality of the death penalty is currently under review in Texas, the state where more than half of U.S. executions are committed, according to various sources. As the Houston Chronicle indicates, some Texas lawmakers aren’t too keen on the idea of the death penalty being labeled unconstitutional. Local Harris County District Attorney Pat Lykos reportedly ordered prosecutors to stand mute during a hearing intended to determine whether the death penalty is unconstitutional in the state.

Death penalty and risk to innocent lives

The case involving 25-year-old defendant John Edward Green, who faces the death penalty after being accused of a 2008 robbery and slaying in southwest Houston, is the first case in Texas legal history where the constitutionality of the death penalty is being argued in the context of the risk of convicting an innocent man. Green’s defense team maintains the client’s innocence.

However, Pat Lykos and the prosecution team’s decision to stand mute in response to the defense team’s argument that the death penalty is unconstitutional brought the case to the brink of deadlock. District Judge Kevin Fine claimed he would not allow the prosecution to stand mute at first, but then allowed the case to continue rather than deadlock it by encouraging the defense to continue to present their case while the prosecution sits silently at counsel tables, unable to object, cross-examine or call witnesses.

“It’s arrogant, and it’s contemptuous for the state to decide to not participate when they’re trying to put my client to death,” said defense lawyer Casey Keirnan while in court.

Prosecution said Green lacked standing to argue against death penalty

Before Harris Country prosecutors stood mute at the death penalty unconstitutionality hearing, they had argued that “the law surrounding the death penalty is well-settled.” Furthermore, the prosecution stated its position that because the defendant had yet to be convicted thus far, he “lacks standing” to argue whether the death penalty is unconstitutional.

Sources

Houston Chronicle

What Texans know about the death penalty

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Don't worry, the cats who were at the Montgomery Animal Shelter are safe. Image from Flikr.com.

Everyone knows the Internet is a powerful thing. Through massive social networking sites, you can get a message to numerous people instantly. However, the Montgomery Animal Shelter closing story is an example of the fact that if you’re going to disseminate a message to the masses, you’d better make sure it’s true.

First, let’s get one thing straight. The Montgomery Animal Shelter is actually the Montgomery County Texas Humane Society. The Montgomery Animal Shelter closing is not in New Jersey, Tennessee or Pennsylvania. The Montgomery County animal shelter in Pennsylvania has been swamped with calls about people concerned for the animals’ lives, according to Philly.com.

More rumors go viral

Social networking can be a great way to inform people about getting a short term personal loan, promote your business and even make money. But it can also be a way of spreading lies and needlessly getting people all riled up.

The other huge misconception out there, which has run rampant on Facebook and Twitter, is that because of the Montgomery Animal Shelter closing, all of the animals will be put to sleep. Several sources, including the Philadelphia Inquirer, the Humane Society of Montgomery and the Montgomery County News confirm that all of the animals have been adopted.

Who comes up with this stuff?

The News PK wrote that the Montgomery County Animal Shelter was closing after animal control officers found decomposing dogs in the building. However, the reason for the Montgomery County Animal Shelter closing is that the organization’s lease was up, and their request for funding to maintain the facility was denied.

So there were no dead dogs, there will be no dead dogs, all the animals are safe and the Montgomery Animal Shelter closing was simply a money matter. Oh yeah, and it’s the Montgomery Animal Shelter in Texas. So that should just about clear everything up.

More about the Montgomery Animal Shelter

It really is a shame that the Montgomery County Texas Humane Society is vacating its building. The shelter’s web site reports that the Humane Society of Montgomery will now direct its efforts toward starting a spay and neuter campaign and program, but it doesn’t sound like they’ll be getting a new building to house strays and unwanted pets anytime soon.

The Montgomery County Animal Shelter opened its doors in 1972. It’s disappointing to see a shelter that has been housing animals for 37 years get shut down. State budgets just aren’t what they used to be.

Focus on reality

Animal shelters in Tennessee, New Jersey and Pennsylvania, all having “Montgomery” in their monikers, were swamped with calls all weekend from people worried that their local shelters were closing. Apparently the Tennessee rumor started because of a typo in a newspaper in which “TN” was printed in a headline instead of “TX.”

In the old days, when there were mistakes in a newspaper headline, the locals would see it, usually read the correction about it the next day, and that’s as far as it went. Maybe a few people would spread something false to a few other people by phone. The spreading of all of the false rumors about the Montgomery Animal Shelter closing didn’t really do too much harm to anyone, besides inconveniencing the other shelters. But let this be a lesson that tales spread on the internet elicit big responses, so be careful what you put out there.