Campaign to Curb Payday, Title Loan Interest Rates

Critics of Texas payday and title loan stores launched a new campaign Thursday to lower interest rates that they say are as high as 400 percent.

According to a survey conducted for the campaign, 85 percent of Texas voters favor an interest rate cap of 36 percent, similar to rates on high-interest credit cards.

The survey of 800 registered voters was conducted for two coalitions, the Texas Fair Lending Alliance and Texas Faith For Fair Lending, in connection with Texas Appleseed.

Nearly three-dozen religious and consumer organizations are said to be involved in the coalitions.

Catrina Torres, of Catholic Charities, said her organization found that one in five of its clients are in additional financial distress because of "predatory lending" at payday and title loan stores.

"We think there is a need for small banking for loans, small-type loans," she said. "That doesn't mean it needs to be usurious."

William Deramus, who does home remodeling, said he visited a Fort Worth store for a small loan when he was short on cash.

"I got started with $500 and ended up owing them two grand," he said.

Deramus said he borrowed money from a friend to pay off the store and now pays the friend 25 percent interest.

"I'm not saying, 'Don't make any money,' but it's like kicking a guy when you're down," he said.

Torres said Catholic Charities conducted its own survey of Dallas area loan stores.

"They aren't giving information to really educate families to what type of loan they're receiving, what are the fees that are accrued," she said.

The stores are everywhere in North Texas. Four are located at the corner of Skillman Street and Abrams Road in Dallas.

Last year, Dallas passed regulations that include a spacing requirement so that future stores would not be so close together.

And the rules require that payment plans be arranged so customers eventually pay off the principal of their loan instead of just rolling it over and adding more fees.

Councilman Jerry Allen led the push for the rules.

He's now urging other cities to pass the same measures to demonstrate statewide support for tougher payday and title loan restrictions when the next session of the Legislature begins in January.

"This is spreading like wildfire throughout the state of Texas at the local level," Allen said.

Allen and the coalitions are seeking actual limits on payday and title loan interest rates that can only by enacted under state law.

"This needs to stop," he said. "At least bring it down to a reasonable rate."

A trade group representing the businesses said the existing state laws that govern short-term borrowing already effectively protect consumers. Consumer Service Alliance of Texas spokeswoman Julie Hillrichs issued the following statement in response to Thursday's release by the coalitions:

"Critics of the small, short-term loan industry claim to be representing the best interests of consumers, yet their mission is to take a financial choice away from Texans.

The Texas Legislature took comprehensive and significant steps in 2011 when it enacted legislation mandating fee comparison, cost disclosure, licensing, full enforcement authority (e.g. fines and restitution), on-site examination; and data collection on short-term lenders.

The consumer advocates making today's announcement participated in the 2011 negotiations and supported the new law. Now they want to eliminate the only credit choice available to many hard working Texans by imposing arbitrary, unsustainable price controls.

We are confident lawmakers will consider meaningful refinement to the law in 2013."