Faith Leaders for Fair Lending to Demand Payday Lending Reform at Capitol

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AUSTIN – Texas Baptists have joined with the Texas Catholic Conference and other evangelical church leaders to form Faith Leaders for Fair Lending, a grassroots effort by people of faith to demand reform of the payday and auto-title lending industries in Texas.

Pastor Steve Wells, from South Main Baptist Church Houston, said, “Payday lenders exploit the law in order to exploit the poor. When there are bad actors in the economy, we rightly turn to lawmakers to make laws that make sense. We therefore call on the legislature to reign in and regulate this out of control industry.”

This week, faith leaders from around the state have joined together to speak out about injustices caused by payday lending and the impact on families, churches and communities. The practices of this industry cost churches and nonprofits helping borrowers, along with Texas families, $2.9 billion in fees last year.

“The unfairness and exploitation represented by much of the payday and auto-title lending industry is morally unacceptable,” said Bishop Curtis Guillory of the Diocese of Beaumont. “The cycle of debt created by these loans prevents the very self- sufficiency families seek. The extreme interest rates and fees charged by payday lenders create a painful cycle of dependence that traps financially vulnerable families throughout our state. It is time to end that cycle and offer families protection from this abuse.”

Among the legislation Faith Leaders for Fair Lending is supporting are HB 3047 authored by Rep. Tom Craddick (R-Midland), HB 2808 by Rep. James White (R- Woodville), SB 92 by Senator Rodney Ellis (D-Houston), which is identical to HB 3047, and SB 121 by Senator Royce West (D-Dallas).

HB 3047 and HB 2808 would:

  • limit the number of allowed refinances to three;
  • require a 25 percent principal pay down with each refinance or installment; and tighten definitions in current law to make consumer protections easier to enforce.

SB 121 would:

  • establish separate, income-based loan limits for certain extensions of credit by credit access businesses;
  • limit and define the types of loan products credit access businesses could offer consumers; and
  • requires credit access businesses to offer extended repayment plans.

Current law does nothing to limit the fees that payday and auto title lenders charge consumers. There is also no limit to the number of times these businesses can charge consumers for essentially the same loan. The average interest rate for these types of loans in Texas is 500 percent. That means a person who takes out a $500 will owe $612 just a few weeks later.

“Payday lending institutions have invaded our communities, in fact they are more numerous than McDonald’s and Starbucks,” said Dr. Michael Evans, pastor of Bethlehem Baptist Church in Mansfield. “Their current business model traps the poor and the financially vulnerable in high cost loans. We are simply asking that our legislative representatives institute reasonable reforms that limit the predatory practices of a virtually unregulated industry.”

Faith Leaders for Fair Lending argues that this is state sanctioned usury and are calling for statewide reform. Faith leaders have been instrumental in efforts by city officials to pass payday lending ordinances at the local level due to the failure of the state to act on behalf of its citizens.

“We have asked the legislature to consider strong payday and auto title industry reform for the last several sessions and we will continue to ask that our legislators act to reform this industry,” said Jesse Rincones, pastor of Alliance Church in Lubbock. “I pray that this is the session that our legislators will have the courage to regulate these predatory loan products and protect our congregations and communities from those who take advantage of people in their most vulnerable financial moments.”

Representatives from Faith Leaders for Fair Lending will provide testimony during legislative committees on Tuesday and Wednesday.

For more information or to interview those testifying, please contact Kathryn Freeman, CLC Director of Public Policy, at kathryn.freeman@texasbaptists.org or 972-768-0046 or Dr. Jeffery Patterson, Texas Catholic Conference, Executive Director at jefferypatterson@txcatholic.org or 512-658-4170.

Additional information on payday lending:

  • 22 Texas cities have passed the unified local ordinances to rein the most harmful payday and auto title lending practices.
    • Cities that have adopted the unified payday and auto title lending ordinance to date include: Austin, Amarillo, Balcones Heights, Baytown, Bellaire, Brownsville, Bryan, College Station, Dallas, Denton, Dickinson, El Paso, Flower Mound, Garland, Galveston, Houston, Midland, San Antonio, Somerset, South Houston, Universal City, and West University Place.
  • Payday lending causes a cycle of debt in which 57% of individuals cannot repay the loan within two weeks.
  • In 2014, 847 cars were repossessed a week due to auto-title lenders.
  • Texas is one of a handful of states with no limits on payday and auto-title loan charges. A $500 loan costs $115 in fees in Texas whereas the same $500 loan costs $55 in fees in Florida.