Payday lending is big business in Texas. Texas workers took out 1.8 million in payday loans in 2003.
Payday loans are short-term loans designed to give workers a cash advance on their paychecks. The problem is that these loans come with a major catch - the interest rates are exorbitant. It is typical for a worker to pay $180 in interest on a 10-day, $700 loan. High interest rates make it nearly impossible for workers to repay the loan on time. In fact, workers often have to borrow again just to pay off the interest on the first loan. The result? More loans, more debt and more bankruptcies.
Texas has not gotten serious about cracking down on payday lenders. While the state technically has payday lending laws on the books, major payday lenders have used a loophole and taken cover under the broad definition of a credit services organization. By law, these entities cannot be monitored and payday lenders are left without a watchdog, and consumers are left without a defender.
This legislative session, Texas needs to close the loophole that lets predatory lenders get away with charging sky-high interest rates.