Payday Reform: Could it Finally Pass?
Consumer advocates, religious representatives and legislators hastily convened a press conference in the rain Thursday on the south steps of the Capitol to celebrate a victory for Texas consumers.
For the first time in Texas, two payday reform bills, HB 2592 and HB 2594 look like they might actually pass the Legislature. HB 2592 requires that payday lenders provide more disclosures about loan fees and HB 2594 requires that payday storefronts be licensed.
The bills passed the Senate Business and Commerce committee Wednesday and are close to final passage. “This hasn’t been the biggest headline grabber,” Republican Senator John Carona, the Senate sponsor of the bills, said of the legislation, “But it’s a significant issue for consumers across the state. And it’s been the most over-lobbied issue of the session – I don’t think there’s an unemployed lobbyist in the state right now.”
Payday lenders are virtually unregulated in Texas and they’ve made millions off of working families charging interest rates anywhere from 300 APR to 1,000 APR. It’s a booming business that the industry is trying mightily to preserve. Already, the payday, pawnshop and auto-title lenders have spent between $3.9 million and $8.4 million on 184 Texas lobby contracts from January 2009 through March 2011, according to the nonprofit Texans for Public Justice. When the lobby reports come in after session, I suspect we’ll see several million more was spent on trying to kill payday reform bills such as HB 2592 and HB 2594.
Which is why Republican state Rep. Vicki Truitt, House author of the reform bills, was hesitant to claim victory at the press conference Thursday. Earlier in the session, the lobby had already torpedoed Truitt’s HB 2593, the so called “controversial” piece of reform legislation, because it would actually enact meaningful reform by limiting the amount and number of loans consumers could take out during a certain time period – breaking the cycle of debt. “The journey isn’t over,” Truitt said. “There are still two very significant votes: one on the Senate floor and the other in the House to bring it back to the full body.”
Truitt had good reason to be cautious. How to explain the bizarre scene on the House floor last week as Truitt battled to pass HB 2594, which would require payday lenders to license their storefront operations. Not only did Truitt have to contend with an army of lobbyists and conservative groups sending out a flurry of last minute emails to legislators to vote against the bills, but also Houston Rep. Gary Elkins who owns a chain of payday lending stores. “I’m free market capital and laissez faire…and this is nothing more than the expansion of government,” Elkins huffed. “I’m just a small business guy with 50 employees. I don’t have a corporate attorney.”
Truitt responded: “Are you aware…do you understand that the language in these bills was negotiated between the industry and advocates?”
“Well, I didn’t agree to it,” Elkins said, after offering his amendment to gut the bill, which was eventually defeated.
On the other side of the debate that day, was former House Speaker Tom Craddick who argued that Truitt’s bills didn’t do enough. Craddick’s bill would have effectively closed down payday lenders but it never got out of Truitt’s committee.
“It’s a bunch of junk that’s not going to help,” Craddick told me on the House floor. “I would have gotten my bill out if Truitt had allowed it. I had the votes to get it out of committee, and I think I could have passed it on the floor.”
Legislators and advocates said Thursday they would have liked more stringent reform bills to pass this session. “In some ways these bills disappoint because they don’t go far enough,” Carona said. “But it’s a step forward in protecting consumers.”
Tim Morstad from the AARP, which had lobbyed to pass the bills said it was the first significant win in 10 years of fighting for reform in the industry. “A lot more work needs to be done,” he said. “But it’s a good first step if we get the bills passed.”
Bee Moorhead, executive director of Texas Impact, a grassroots coalition of religious groups, said the bills would provide important information about the industry of which they know little. “We’ll be able to find out more about whose applying for the loans and how the industry is growing,” she said.
Now they’ll wait to see if the payday industry keeps its side of the bargain and respects the negotiations, or will the high-priced lobbyists prevail and kill the two bills in the final days of session? Truitt struck a hopeful note: “I have no reason to believe we won’t have the support,” she said.
We’ll find out for sure when the bills will come up Saturday in the Senate chamber for a vote.