Christine Graham and Juan Garcia from the Office of Consumer Credit Commissioner of Texas, spoke about payday lending today.
The poor often have trouble making ends meet between one paycheck and the next. Many turn to payday loans. Payday loan rates are so high, many take a year to pay them back. More time means more interest. Interst compounded on interest. Pay off a loan in two weeks at about 22 percent interest. The federal Consumer Financial Protection Bureau, however, says payday borrowers stay in debt an average of 11 months or longer. A one-year loan could lead to 700% interest.
One person repaid nearly $600 on a $250 loan. In 2013, there were 2,543,855 payday loans made in Texas. In that year, there were also 2,927,741 payday loan refinances in Texas, cases where borrowers needed more time to pay back. There are 3,500 payday and title lending stores in Texas. Some Texas legislators are wanting to see tougher legislation to fend off predatory lenders.
Loans in Texas are regulated. There are groups that prey upon the poor, offering high interest loans, by saying they are not a lending institution. They make act as a de facto co signer with a third party lender, charging a high fee that they do not call interest, but a fee.
Predatory lending (ursury) is condemned in the Bible, and was criticized during the Reformation.
36-40% APR interest is often the norm. 1,576 criminal complaints were issued against debtors in eight Texas counties between 2012 and 2014.
Debtors’ prisons, banned 180 years ago, seem to be coming back: http://www.huffingtonpost.com/2014/12/29/texas-payday-lending_n_6355602.html
The Republic of Texas Constitution, drafted just a few years later, in 1836, establishing Texas as an independent nation, declared, “No person shall be imprisoned for debt in consequence of inability to pay.”
Here’s a 2013 investigation by the Texas Observer: http://www.texasobserver.org/cash-fast-how-taking-out-a-payday-loan-could-land-you-in-jail/
See also: http://www.cbs19.tv/story/28114957/the-debt-trap-the-cost-of-payday-lending-in-texas
