AUSTIN—A predatory lending bill in the Texas Senate not only fails to deliver on promised reform of payday lending, but also represents several steps backward for Texas consumers, according to a Christian Life Commission spokesman.
Stephen Reeves, director of public policy for the Texas Baptist CLC, joined Jeffery Patterson, executive director of the Texas Catholic Conference, and Ollie Besteiro, state president of AARP, in sending a letter to Texas senators expressing opposition to SB1247 in its current form.
The bill contains no limit on rates and fees payday and auto title lenders can charge and no database to aid in enforcement—“the two most effective tools proven to prevent the cycle of debt in other states,” the letter says.
Most significantly, the letter continues, “The bill contains an explicit pre-emption of existing local ordinances reversing hard-fought gains at the local level, reversing progress for over 4 million Texans.”
By authorizing installment lending in Texas without limits on rates and fees, the proposed legislation would “cut at the very heart of our usury laws,” the letter states.
“It would create an uneven playing field, violating free-market principles by granting the right to charge unlimited amounts only to payday and auto title lenders, while every other installment lender in Texas would remain subject to longstanding provisions that protect consumers.”
Under the provisions of the bill, a six-month $1,000 installment loan refinanced once and carrying a annual percentage rate of 659 percent would cost a borrower $4,140.
“A bill that fails to address such usurious installment loans cannot be called real reform,” the letter says.
While current law requires auto title loan not to exceed 180 days, the bill would authorize yearlong loans without any controls on costs.
“Our constituents demand and Texans deserve real reform,” the letter concludes. “We remain committed to fighting for reform and hope this bill can be improved to meaningfully attack the cycle of debt and usurious lending. At best, this bill codifies some of the worst practices in the industry while wiping out the good work done at the local level.”