Payday and Auto Title Lending in Texas

me to Close the Loophole and Level th Playing Field

The Texas Constitution

ARTICLE 16. GENERAL PROVISIONS

Sec. 11. USURY; RATE OF INTEREST IN ABSENCE OF LEGISLATION.

The Legislature shall have authority to define interest and fix maximum rates of interest; provided, however, in the

absence of legislation fixing maximum rates of interest all contracts for a greater rate of interest than ten per centum (10%) per annum shall be deemed usurious; provided,
further, that in contracts where no rate of interest is agreed upon, the rate shall not exceed six per centum (6%) per annum.

Texas Finance Code

TITLE 4. REGULATION OF INTEREST, LOANS AND FINANCED TRANSACTIONS, SUBTITLE B CHAPTER 342: CONSUMER LOANS Sec. 342.007. DEFERRED PRESENTMENT TRANSACTION Passed in 2001

Office of Consumer Credit Commissioner

Governed by the Finance Commission of Texas Sets interest rates and fees Regulates the market by

Licensing Lenders Enforcing Texas Law Educating Consumers and Credit Providers Communicating Among the Industry and Public

A History of Loopholes

Prior to 2005, payday lenders in Texas partnered with banks from other states in order to avoid Texas usury laws.

When that loophole was closed by federal action, the industry found a new loophole in order to avoid the regulations contained in the Texas Finance Code.

Credit Services Organization

393 CREDIT SERVICES ORGANIZATIONS

XAS FINANCE CODE, TITLE F FINANCIAL SERVICES

5: PROTECTION OF CONSUME

APTER

) "Credit services organization" means a person who provides the following services with respect to the extension of consumer edit by others:

) improving a consumer's credit history or rating;

B) obtaining an extension of consumer credit for a consumer

) providing advice or assistance to a consumer with regard to Paragraph (A ).

ed in 1997 and intended to regulate organizations that help duals repair or improve credit.

How the loophole works

CSO or Payday Lender

Who gets the money out of $361.06

The CSO Act sets limit on rates and fe

$60.00

Borrower

Financial Institution

The Debt Trap

Date 4/25/2010 (2 weeks) 5/9/2010 (4 weeks) 5/23/2010 (6 weeks) 6/6/2010 (8 weeks) 6/20/2010 (10 weeks) 7/7/2010 $61.06 $61.06 $61.06 $61.06 $61.06

300 Payday an made on April 12th

Fees and Interest Charged Amount Du

$361.06 $422.12

1 Rollover

2 Rollover

$483.18

3 Rollover

$544.24

4 Rollover

$605.30

nnual Percentage Rate

529%

ar Title Loan Repayme

Date 4/21/2010 5/21/2010 6/20/2010 7/20/2010 8/19/2010 $1,269 $1,269 $1,269 $1,269 $1,269

4,000 Autole loan made March 22nd

Fees and Interest Charged Amount D

$5,269

1 Rollover

$6,538

2 Rollover

$7,807

3 Rollover

$9,076

4 Rollover

$10,34

APR =

380%

Expansion in Texas
Numbers & Graph (Ann B. will finish) In 2006 - 1,279 CSOs registered in Texas. In 2010 - over 3,594 registered.

Thats more locations than McDonalds and Whataburger combined.

District Specific Info

Average number of CSO locations per House district = 21.7 Highest Number 45 Rep. Hochberg, the smallest geographic district in the state. MAPPING for All House and Senate Districts

Example:http://www.communitywalk.com/arlington/ http://www.communitywalk.com/arlington/ tx/house_94_patrick/map/555986

Local Action
Zoning Ordinances
Irving Richardson Little Elm Garland Mesquite Sachse San Antonio Brownsville

solutions

nsville nd ardson se Antonio se so ett s County r County ian Basis Regional Council

Bills that Close the CSO Loophole & Level the Playing Field
HOUSE SENATE

10 by Rep. Tom Craddick

SB 253 by Sen. Wendy Da

56 by Rep. Joe Farias

SB 251 by Sen. Royce We

61 by Rep. Eddie Rodriguez

hapter 342 vs. CSO Loophol

Payday Loans
Existing Lending Law $15.60 135% (14-day term) CSO Loophole

Car Title Loans

Existing Lending Law $22.00 89% (30-day term) Car Title Yes

CSO Looph

e Charges 00 loan)

$60.00 521% (14-day term) day

$75.00

304% (30-day ter

eral

Post-Dated Check Post-Dated Check Dated Yes No $100 per

Car Title No

ght

aid to State

$100 pe

rotecting Military Familie

Congress passed, and Pres.George W. Bush signed in to law, new regulatio hen lending to members of the armed forces and their immediate family. Tex Fair Lending and the 500% Interest is Wrong Coalition support efforts to ins federal law is enforced in Texas.

B 254 by Sen. Wendy Davis

Best Legislative Approach

Previous legislative attempts at regulation created a new regulatory scheme, including rates and fees, duplicating what is already in the Texas Finance Code. expressly exempted CSOs from the newly created regulations Did not include regulations for auto title lenders

Bottom Line: Until we close the CSO loophole, : payday and car title lenders will be able to continue to avoid necessary consumer protections. The bills referenced today ARE the compromise.

Scripture and Interest: hat our Faith Traditions Teach

ebrew scriptures: If you lend money to my people, to the poor among you, you sh ot deal with them as a creditor; you shall not exact interest from em. (Exodus 22:25)

hristian scriptures: Luke 6:34 And if you lend to those from whom you expect to ceive, what credit is that to you? Even sinners lend to sinners, to ack the same amount.

lamic scriptures: And what you give in interest that it may increase on other eople's wealth, increases not with Allah (God). (Q'uran 30:39)

Coalition Members

Web Resources

w.stoppaydayabuse.org

www.texasfaithforfairlendin