Bills seek to crack down on 'predatory' lenders
Payday and title loan signs have popped up all over North Texas. It is a promise of quick money with interest rates critics call predatory.
The Texas Legislature has at least five bills pending to crack down on the lenders; but the question is will any of them have a chance to pass?
James Cox said he was desperate when he and his disabled mother borrowed $100 dollars from a payday loan company.
"She just got out of the hospital and we needed some cash for some prescriptions just to get by for a week," he said.
But the loan came at a hefty price with an interest rate over 400 percent. Licensed lenders, like banks, can only charge 36 percent, but payday lenders are unregulated. It can be the last resort for people with bad credit.
"The one thing everyone can agree on is there is a need for small loans," said Rob Norcross, an industry spokesman.
Payday loan companies typically charge $15 to $20 per $100 borrowed. However, the loan has to be paid back in a month or less. But half of those who borrow can't pay them back on time, so the charges balloon. In Austin, Sen. Wendy Davis, of Fort Worth, has coauthored several bills aimed at protecting borrowers
But many in the industry claim that when other states capped interest rates, lenders pulled out and that hurt the poor even more.
"Personal bankruptcies have increased and non-sufficient funds fees and the bounced check fees people are paying in these states have skyrocketed," Norcross said.
For the Cox family, the $100 loan ended up costing more than $1,000
"They just play off our desperation," Cox said. "That’s what it seems like."
In Austin, observers say one bill to regulate loans to people in the military is likely to pass. The others are likely in trouble.
Source: http://www.wfaa.com/sharedcontent/ |
