House Bill 410 would seek to end predatory lending in Texas

PayDay lenders insists they're only trying to help the poor.

In the world of predatory lending, the people who can least afford it, are the ones targeted by pay-day lenders. As a result, they end up paying exorbitant interest rates and fees. This all might change soon. If Texas representative Tom Craddic (R) has his way, these types of businesses could be outlawed in Texas as soon as September 1st.

From the Killeen Daily Herald

A new bill in the Texas House could shut down a statewide $4 billion industry with 3,500 registered storefronts if passed, but officials who support the measure say this would be good news for consumers.
House Bill 410, authored by Rep. Tom Craddick, R-Midland, and joint-authored by Rep. Sid Miller, R-Stephenville, would no longer allow payday loan offices to lend in Texas.

If passed, the bill would block the ability of credit services organizations — which are loan offices that lend payday loans, car title loans and other small, short-term cash loans — to "obtain an extension of consumer credit for a consumer or assist a consumer in obtaining an extension of credit."

According to the Federal Deposit Insurance Corporation, payday loans are lent to borrowers on the promise to repay out of their next paycheck or deposit of funds. These loans typically have high fees and are often rolled over repeatedly, making the annual percentage rate extremely high.

Craddick and other critics of the industry prefer to use to the term "predatory lending." They say these lenders take advantage of people in desperate situations. If the borrower is unable to pay back the loan within the time-frame, typically two weeks, they can renew or "roll" the loan for a fee.

According to the Texas Business Review from Bureau of Business Research at the University of Texas, the average borrower ends up paying about $840 for a $300 loan. Credit services organization companies in Texas constitute a $4 billion a year industry, the review states.