Regulation Over Payday Lenders in Texas
Regulation Over Payday Lenders in Texas
According to a recent report, approximately 8 percent of adults in Texas have taken on a payday loan in the past half decade. Moreover, this is one of the several disturbing results in a study conducted by Pew Charitable Trusts. The study emphasizes that the city of San Antonio must progress with plans to improve the laws for lenders.
In addition, the report found out that of the 28 states with the least regulations in terms of payday loans, Texas is one of them. What’s even more disturbing is the fact that most of the borrowers are using high-interest payday loans to pay for their everyday expenses.
In the United States, a total of $7.4 billion every year are spent by borrowers on payday loans and they pay an average of $520 as interest.
High-interest payday loans are supposed have a two-week term, and these are intended to assist consumers in times of unprecedented financial emergencies. Unfortunately, in reality the term is for five months and borrowers do not actually use it for unprecedented expenses. In fact, several of the loans are used to pay for utilities, credit card bills, mortgage or rent.
A lot of borrowers who take on payday loans most of the time end up drowning in debt, and having to refinance since they cannot pay back the primary loans on time.
In the following month, an ordinance that will put limits on payday loans is set to be proposed by the City Council, headed by Councilman Diego Bernal. The anticipated ordinance moves to restrict payday loans to 20 percent of a borrower’s gross monthly income, and restrict auto title loans to 3 percent of income or 70 percent of car’s value. Also, Bernal also wants the ordinance to control the loan terms and interests.
Because of the lack of regulation over Texas payday lenders, the Legislature must address this problem immediately.
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