Last week a group of consumer, civic and religious organizations including a few Waco residents went to Austin to speak to House and Senate committees on dubious lending practices by payday and auto-title lenders that cost Texas consumers an estimated $1.4 billion annually in fees.
The Texas Legislature held a hearing on HB 3047 authored by the senior-most member of the Legislature — Rep. Tom Craddick, R-Midland. This bill is supported by the Texas Fair Lending Alliance, a coalition of over 60 organizations and individuals working to transform the Texas payday and auto-title loan market. Communities of faith across the state also support it. The bill mirrors city ordinances already adopted by 22 Texas cities with common-sense limits to prevent the cycles of ongoing debt way too often caused by these loans under current Texas law.
Texas laws do not limit the fees payday and auto-title lenders can charge. There also is no limit to the number of times these businesses can charge high fees for essentially the very same loan. These lending practices often trap borrowers in endless debt where they’re unable to pay off the loan. City ordinances address this by limiting the size of loans based on income; requiring principal repayment with every payment; and limiting loan rollovers so borrowers don’t get stuck paying repeated high fees without making progress on repaying the actual loans.
In the Waco area, in 2014, 36 payday and auto-title lending operations made more than $11 million in new loans and collected about $10 million in fee charges on those loans. About 14 cars are repossessed each week in Waco due to failure to meet these exorbitant fees and interest.
In response, a group of community members formed Citizens for Responsible Lending (CRL). It consists of 55 citizens representing Waco and McLennan County and working at the grassroots level to rein in payday and auto-title lending practices. The mission is to educate, advocate and create viable alternatives to predatory lending, creating financial security for all. CRL is comprised of four groups that work under one umbrella addressing loan alternatives; possible regulation by city ordinance; data collection; and education.
Phil York, director of development at Habitat for Humanity, stresses CRL’s mission: “No one from CRL is anti-business. We are pro-good business, pro-Waco and Pro-Texas. Organizations such as CRL are diligently working toward alternative loan models in addition to education programs for youth so that as they begin to make their own decisions, they’re aware of the opportunity and risks associated with these loans.”
This is a crisis in the community. As citizens, we have a responsibility at the local level to develop alternatives and to educate the public on the issue. Todd Stoner of Disciplined Investors, another CRL member who attended hearings, says the payday industry has hired 87 lobbyists to oppose significant change. This means now is the time to act.
As one local borrower reflected: “If I could change anything about them, I’d say don’t take them completely away because people need them, but lower the interest rate. They get away with it [high interest rates] because they say they’re not the [actual] lender and they can’t do anything about it.”
We are doing what we can at the community level. We need the Legislature and Congress to stand up for struggling families. We ask our members of Congress to support Consumer Financial Protection Bureau efforts to reform abusive practices in this market. We ask our state and federal lawmakers to pass meaningful payday and auto-title lending reforms. And we ask fellow citizens to let our lawmakers know such reforms are good for our families, good for our economy.
Alexis Christensen is a community organizer at Waco Community Development Corp. where she focuses on community building, leadership development and building collaborations.