Texas cities taking steps to regulate payday loans
Cities across Texas are passing ordinances to regulate payday and auto title lenders. These loans can lead to serious financial troubles for consumers.
In July 2014, the city of Brownsville, Texas announced that it was coming closer to passing a city ordinance to regulate auto title and payday lenders. If the city council approves the proposed ordinance, Brownsville will become the 19th city in Texas to have passed measures to regulate payday and auto title loans. City officials across Texas have pushed for these laws because of the predatory nature of these lenders and the havoc that these loans can wreak on people’s finances.
Putting limits on loans
Brownsville’s city commissioner announced that the proposed measure would require auto title and payday lenders to register with the city in order to be able to do business in the city. The ordinance would limit the amount that people can borrow, as well. Payday loans would be capped at 20 percent of the borrower’s gross monthly income, and auto title loans would be limited to the lower of either 70 percent of the vehicle’s value or 3 percent of the borrower’s gross annual income.
The ordinance would limit the number of payments on these loans to four, either four installment payments or three rollovers into new loans. Each rollover or installment has to reduce the principle amount by at least 25 percent. Under the terms of the ordinance, an extension of credit made within seven days of a previous extension of credit would count as a rollover.
Dallas, El Paso, Midland, San Antonio, Houston and Austin have already passed similar ordinances. Efforts at passing a law at the state level have failed, however.
Dangers of payday loans
Payday loans can trap consumers in a dangerous cycle of borrowing, causing people to spiral further down into debt. People in economic crisis borrow money from these lenders, often paying interest and fees that are the equivalent to a 150 percent interest rate. When the loan comes due in two weeks, they often do not have the money to repay it, so they roll it over into a new loan. Many can never get out from under the debt they have amassed.
The Center for Public Policy Priorities reported that borrowers in Texas take out larger loan amounts and pay higher fees than the national average for payday and auto title loans. Part of the reason for that is that there are no state-wide regulations limiting the amount people can borrow and the fees lenders can charge. Creditors have also begun pursuing lawsuits against borrowers so they can garnish wages – further damaging the financial situations of those who are already in dire financial straits.
Exploring debt relief options
If you are struggling to repay payday loans or other debts such as credit card and medical bills, you may want to consider speaking with a debt relief attorney. An experienced attorney can discuss debt relief options such as debt consolidation, debt settlement and bankruptcy with you and see which one might be most appropriate for your circumstances. If you have questions about debt relief, contact a seasoned debt relief attorney who can help you start to rebuild your financial security.
Keywords: debt relief; bankruptcy; wage garnishment; payday loan