Payday Lenders

Lawmakers urged to hold payday lenders to same standards as others

AUSTIN—Texas Baptist pastors joined other religious leaders and consumer advocates urging a Texas House of Representatives committee to hold payday and auto-title lenders to the same rate and fee limitations as other small-dollar consumer loan businesses in the state.

Citizens concerned about what they view as predatory lending practices urged the House Investments and Financial Services Committee to support HB 2019 by Rep. Tom Craddick, R-Midland.

The committee took no action April 15, and the bill is left pending in committee.

Craddick told the committee about a woman in his district who took out a $5,000 car-title loan to pay for funeral expenses for a family member and ended up owing $12,000 in fees. Payday and auto-title lenders are “preying on people who can’t afford it,” he said.

Teresa Clingman, district attorney in Midland, noted when she first learned about the plight of the woman in her city, she assumed the exorbitant fees must be illegal and was surprised to discover they were not.

Citizens who testified in support of Craddick’s bill described how elderly people, the working poor and individuals who face emergency expenses turn to storefront lenders who charge more than 700 percent annual interest to borrowers after rollovers and fees.

Chad Chaddick, pastor of Northeast Baptist Church in San Antonio, recalled when he first learned about a family who rolled over a loan nine times and ended up with interest and fees that amounted to 740 percent annual interest.

Chaddick appealed to lawmakers to hold payday and auto-title lenders to responsible limits rather than allowing “what the market will bear.”

“I would like to point out that the market is a poor standard for helping us measure what is good for ourselves, for our fellow citizens or for our state. The market will continue to bear a great many things that are not good,” he said.

Legislators have a responsibility to give moral guidance to an amoral market by offering incentives to those elements that are good for society and eliminating or regulating those aspects that cause harm, Chaddick insisted.

Gail Rowland from Houston told the committee she lived paycheck to paycheck but managed expenses responsibly for more than 10 years of full-time employment until medical expenses led her to take out a payday loan.

After she presented a check, a driver’s license and proof of employment, she was approved for the loan in a matter of minutes. Although she has repaid the principal, Rowland said, she sees no end in sight to the accumulated rollovers and fees.

“Am I responsible for the decision I made? Absolutely. …We make bad decisions. The payday lenders help us make bad decisions,” she said.

Pat Cirillo, president of Cypress Research, testified against the bill, insisting that in states where payday lenders are regulated, 15 percent to 30 percent of borrowers turn to Internet-based companies, many of them located off-shore or overseas.

“Elimination of storefront lenders has unintended consequences,” she asserted. Cypress Research has conducted research for the payday lending industry.

Jeff Johnson, pastor of First Baptist Church in Commerce and president of the Baptist General Convention of Texas, urged lawmakers to recognize the need for common sense governance—particularly in regard to protection of the vulnerable—and think “outside the box” to make sure people have access to small loans at reasonable terms.

“Common sense tells us we are not for depleting the assets of those who are most vulnerable in our communities,” he said.

Others who testified in support of HB 2019 included Stephen Reeves, director of public policy for the Texas Baptist Christian Life Commission; Randy Wallace, pastor of First Baptist Church in Killeen; Bryan Richardson, associate pastor at First Baptist Church in San Antonio; Joe Vasquez, bishop of the diocese of Austin and representative of the Texas Catholic Conference; and Ann Baddour, senior policy analyst with Texas Appleseed.

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