Lufkin financial expert says desperate times lead people to seek loans

By Morgan Thomas

LUFKIN, TX (KTRE)- If numbers are any indicator, then business is booming for pay-day loan and car title agencies in Lufkin.

Almost non-existent regulations have allowed these lending practices to flourish, but the tide may be turning.

Desperate times call for desperate measures.

"Lost a job, they need money to go see a doctor, they have to pay their utility bills and they go get a loan," said bankruptcy lawyer Stephen J. Zayler.

There's no choice, but to turn to a pay day advance or car title loan business. And when they can't afford to pay it back, Zayler says they go elsewhere to find another one.

These lenders offer smaller loans than banks and don't require credit or background information.

"So if they feel the risk is higher they're going to charge a higher interest rate. There's nothing wrong with that," said Zayler.

Unless, you take a good hard look at just how high these interest rates can go, 100, 200, up to 400%.

"Is there a point when the interest rate becomes abusive?" asked Zayler.

There's few restrictions or regulations on these businesses, which contributes to high profits.

"They charge very high interest rates on relatively small loans, they have a high volume.  So they make a lot of money doing that," said Zayler.

In some parts of Lufkin there seems to be a pay day or car title loan on every corner.  Thrifty Loans was the sixth business KTRE asked for an interview.  They all refused to comment and wouldn't even explain what type of service they provide.

Zayler speculated on why they kept away from cameras.

"The more people find out about them and the rates that they charge and the burdens they place on people, then the more likely people are going to be upset and want them regulated."

That may already be happening.  Pending legislation in Washington and some states intends to crack down on these lending practices.

"There ought to be some reasonable restrictions so they cannot take advantage of people," said Zayler.

Zayler concedes there is a definite need for their services.

"The justification for allowing these is that the people can't get loans elsewhere," said Zayler.

With the tough economy, pay day advance and car title loan businesses probably aren't going anywhere.

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