It’s good to be a payday lender


Earlier this legislative session, a chief of staff for a senator noted that the $4 billion Texas payday and auto-title loan industry would soon grow powerful and lucrative enough that the Texas Legislature would be unable to take it on. That time may have already come.

At a legislative hearing this morning, state Sen. John Carona, the Dallas Republican who’s leading the payday “reform” effort in the Senate, basically said the industry had bought off lawmakers. Carona was defending the latest version of his payday loan legislation, which most advocates derided as unacceptably weak. Senate Bill 1247 would scuttle the efforts of most of Texas’ big cities—Austin, San Antonio, Dallas and El Paso—to rein in payday loan excesses and codify the industry’s loan products in statute.

“You have to get the most you can get with the political support that you have,” Carona said. “This industry is in business and this industry has amassed enormous political support at the Capitol.”

He urged opponents to consider that the votes were lacking in both the House and the Senate to pass anything more.

Yesterday, campaign finance watchdog Texans for Public Justice released a report that “loan sharks” had poured almost $4 million into Texas politicians during the past two election cycles.

Carona blamed the industry’s stroke for the hobbled proposal he laid out in committee this morning. In almost every respect it’s weaker than the filed bill.


“None of this will meaningfully change the market,” said Ann Baddour of Texas Appleseed.

The latest version would also allow a one-year, multi-payment auto-title loan that would cost a borrower $5,000 to pay back a $1,000 product. The previous version had capped the length of such a loan at 270 days.

“They’ve basically created new uncapped loan products,” Baddour said.

Bishop Joseph Vazquez said the legislation “offers a few positive measures while it ultimately endorses predatory lending practices.”

“Current industry practice, which would be given state sanction, only rewards borrower failure with lender profit.”

Perhaps most galling to reform advocates is that the legislation would wipe out existing city ordinances, which almost uniformly provide stricter lending regulations. While Carona lamented that legislators had been persuaded by lucre to abandon whatever conscience they might have, a city councilman from San Antonio made a salient observation.

“While they’ve amassed a significant amount of political capital here, outside of Austin there is not anywhere a component of constituents that are on their side.”

The San Antonio City Council member in question is Diego Bernal, who pushed the San Antonio effort to curb payday lending excesses and who made his feelings about the industry quite clear. Any legislation that rolls back the local efforts to regulate payday lending is not only unacceptable, it’s unconscionable. Any legislator that votes in favor of such a bill should be ashamed of themselves. Thankfully, this weakened bill may get killed in the House.

But the compromise reached with industry groups may have cost Carona his House sponsor. Rep. Mike Villarreal, D-San Antonio, said he does not believe “the version presented in the Senate committee today provides adequate protection for consumers.”

He left open the possibility that further negotiations would produce a stronger version. “I know Chairman Carona would like to strengthen the bill,” Villarreal said. “I’m hopeful we can pass a balanced bill. But I’d rather pass no bill than legitimize usury.”

Amen to that.

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4 Responses to It’s good to be a payday lender

  1. John says:

    If banks would actually lend again then these businesses would not be around.

    I tried getting a loan a year ago

    1) 790 FICO

    2) 30% cash down

    3) appraisal was above purchase price

    Chase still turned me down due to being self employed and they did not recognize some of my income. All large banks are doing the same thing, they are funding debt to the large PE funds etc but doing next to nothing in terms of organically growing their loan portfolio

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