Thu January 5, 2012
Local Payday Lending Laws Bolstered by the State
New year, new laws: The Texas Tribune reminds us that legislation aimed at reining in payday lenders, passed by the Texas Legislature last year, came into effect January 1:
New laws aimed at curbing predatory lending take effect this week, meaning payday and auto title loan businesses will have to be licensed by the state and post a schedule of fees in a visible place, similar to the overhead menus seen in fast food restaurants.
Proponents of the new regulations passed by lawmakers during the 2011 session say they're needed because the practice of offering short-term, high-interest loans to consumers has led thousands of Texans into a cycle of debt and dependency. Lawmakers heard horror stories about consumers being charged interest rates in excess of their initial loans.
The city didn’t install a cap on the interest rates companies could charge, but they did limit the amount of money a single person could be loaned to a percentage of monthly income. The city also limited the number of times a loan could be refinanced. The city’s rules also addressed payday lenders from a zoning standpoint, by prohibiting new storefronts from opening within a certain distance from homes, highways and even competing lenders.