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A Last-Ditch Effort to Rein in Payday Loans

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State Rep. Mike Villarreal
State Rep. Mike Villarreal (D-San Antonio)

In a last-ditch effort to salvage payday loan reform this session, Rep. Mike Villarreal (D-San Antonio) called on a recalcitrant House committee to send legislation to the Full House. (Sen. John Carona, a Dallas Republican, was scheduled to attend the press conference but couldn’t make it.)

“It is time for this Legislature to protect consumers from the cycle of debt,” said Villarreal. “It is time. We need to do this now. We should not put it off any longer.”

In April, the Senate passed a surprisingly tough bill that would’ve imposed strict caps on interest rates for payday and auto-title loans, effectively shutting down the $5 billion market in Texas.

But the House Committee on Investments and Financial Services has refused to budge. Villarreal, who chairs the committee, said today that he is the only ‘yes’ vote on his payday reform bill, even though his version is significantly weaker than what the Senate passed. The committee has two Democrats and five Republicans. In a hearing on April 29, members of the committee spent hours perishing the thought of regulating payday and title loans, which often carry interest rates in excess of 500 percent APR. “It allows individuals to exercise their freedom,” said Rep. Charles “Doc” Anderson (R-Waco).

Villarreal’s approach would limit the size of loans based on borrower income; limit the number of loans a consumer can have at any given time; restrict the number of “rollovers” or refinances; and pre-empt cities from enacting their own payday regulations.

That approach, Villarreal said, respects markets while “also recognizing our state’s long history and tradition of moral and legal opposition to usury.”

If the Legislature fails to do something meaningful, Villarreal promised to travel around the state, helping cities pass ordinances to regulate the industry. So far, Austin, Dallas, Denton, El Paso and San Antonio have enacted ordinances.

  • Sally Nachelle

    This blog is very nice and informative. In the present economic scenario, people are often short of cash. Most of the time due to low income level and poor credit score, they are not able to secure loans from the lenders. In this case payday loan plays a great role. People can get payday loan very easily without any hassles. The main reason behind this is that the payday lenders don’t check the credit report of the consumers and give these short-term loans at high interest rates. Now-a-days it’s very easy to get a payday loan through online. But there is high chance that the loan will be illegal. That’s why I feel people should think twice and aware about the US payday loan laws before taking out a payday loan.