New Bills Add Regulations to Texas Payday Loan Industry
Bills Will Enforce Consumer Awareness of Fees and Empower Office of Consumer Credit Commissioner
by Branford Lyles on July 28, 2011
Two new bills were passed this week in the Texas State Legislature which will go into effect on January 1st, 2012. The first one, House Bill 2592, requires disclosure of specific information regarding the interest rates and penalties for payday loans by lenders. The information must be posted “in a conspicuous location” within the store as well as “on any Internet website, including a social media site” which is run by the lender. This allows customers to inform themselves of the terms before they apply for a loan.
Other information that must be posted includes contact details for the Texas Office of Consumer Credit Commissioner and its helpline as well as a statement reading, “An advance of money obtained through a payday loan or auto title loan is not intended to meet long-term financial needs. A payday loan or auto title loan should only be used to meet immediate short-term cash needs. Refinancing the loan rather than paying the debt in full when due will require the payment of additional charges.”
House Bill 2594 would grant the Office of Consumer Credit Commissioner more power in regulating the payday loan industry in the state. Part of this new regulation will include the enforcement of lender licenses throughout the state. The license must also be displayed prominently within the lender location.
Some critics of this bill claim that fees assessed on payday lenders will be passed by them down to consumers through higher prices for loans. These raises would subsequently inhibit the ability for borrowers to obtain these types of loans.
The daily floor report of the House Research Organization for the Texas House of Representatives says the opponents of the bill feel “CSHB 2592 would give OCCC new regulatory authority, which could have unintended consequences. For example, the Texas Department of Insurance has exercised regulatory authority in the past with the stated intent of protecting consumers but ended up regulating prices and harming consumers instead.”
In support of the bill, the report states that “The bill would establish only reasonable fees needed to investigate consumer complaints, conduct licensing investigations, and support much needed financial education in the state. Compared to the very healthy profits reaped by CABs (payday lenders), these fees would be minimal.”
The two bills are designed to create a new wave of regulation on the payday loan in industry in Texas.
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