AUSTIN—Some Texas Baptists continued their legislative fight against what they call the “predatory” lending practices of payday and auto-title lenders, testifying before the state Senate Committee on Business and Commerce.
Texas Baptists testified how the practices of payday and auto-title lenders adversely are affecting their communities.
Texas payday lenders operate in a loophole in state legislation that enables them to charge interest as high as 500 percent on loans, said Suzii Paynter, director of the Texas Baptist Christian Life Commission.
That creates a situation where people take out loans in desperation and never can repay them. If legislators would close the loophole, payday and auto-title lenders would be forced to operate under the same rules as all lenders in the state.
“Payday products have created a perpetual product,” Paynter testified before the Senate committee. “And I want to make a point about this. We’ve really focused on the need and how that first need is really important. The person gets the $200 or $500 that they need. It’s not that moment that’s the problem. It’s the problem the product creates—the perpetual pattern of debt. It’s just simple math. In these loans, you can take out a $4,000 car loan. You can pay $1,200 a month and never pay off the loan.”
When people and families are caught in the downward spiral of payday loans, they suffer, Paynter noted. When Texas families are hurt, Texas business also is hurt. Financially struggling families cannot support local businesses, stunting the economy.
“When a family is affected by this, it does affect the business of Texas,” she said.
Frederick Haynes III, senior pastor of Friendship West Baptist Church in Dallas and representative of a four-church coalition against predatory lending, said in the past several years, about 20 payday lenders have cropped up within a five-mile area near the coalition churches.
A widowed grandmother in the area turned to one of the payday lenders for a $300 loan she used to purchase medicine. The total cost of repaying the loan was $700. A college student took out a $200 to $300 loan to buy textbooks. Total cost of repayment was $600.
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“We have had complaints from members of our churches and members of our community.” Haynes said.
Chad Chaddick, pastor of Northeast Baptist Church in San Antonio, said a member of his church had a similar experience. A single income family supporting six children and an elderly mother-in-law was in danger of losing its home. When the family turned to the church for help the first time, the congregation provided financial assistance. The second time the church was asked for help, it began looking at the family’s financial situation.
The church discovered the family had taken out a $700 payday loan. The terms of the loan indicated the family was to pay $200 every two weeks, which was crippling the family financially. After nine payments, the family had not reduced the principle of the loan at all.
Northeast Baptist Church helped pull the family out of their predicament, and with education, they now are living within their means.
Several legislators, including Sen. Wendy Davis, D-Fort Worth, former House Speaker Tom Craddick, R-Midland, and Rep. Eddie Rodriguez, D-Austin, have filed bills that would close the loophole that allows payday lenders to charge higher interest than other loan entities.
For more information about this issue and how to inform legislators how payday lending affects Texas, call (512) 473-2288.
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