It is well-known that Texas refers to permissive states when it comes to payday lending regulation. This results in the number of payday loan places as well as in the popularity of such loan product as well. At the present moment the state displays the statistics that an average amount of a loan taken in Texas is $468, while the nationwide statistics is much lower – just $392.
This is explained by the fact that Texas has no strict limitations to the amount of a loan that can be issued, nor does it actually cap the interest in the way some other states do. As a result, interest rates here are also higher than across the country as well. For instance, APR is 439% in Texas; and nationwide one is 339%. Similar statistics can be found in the sector of car title loans.
As with payday loan issue elsewhere – the topic is very controversial and there is much debate going on about the necessity of payday loan law restrictions. Some advocate for it, others are against and the latter actually say that by introducing restrictions borrowers are also restricted in their access to capital.
Besides, there are still questions about such huge popularity of short-term loans despite the fact that they are so expensive. For instance, car title loans can be renewed 8 times in Texas – this results in about pays $2,142 of interest (for a loan of $941) and it is pretty expensive.
Still, borrowers do apply for payday loans as well as short-term auto loans and the problem with high interest is not in the interest being actually high; but in the fact that people just do not understand how the APR calculates and how the eventual number form. Surely, payday loans have interest rates that exceed rates for any other type of credit – but no one tries to conceal it and lenders do notify their customers about the rates. After all, they have to do it, to disclose their terms in order to operate in the state.
Hence, the criticism about payday lenders is not always fair since borrowers frequently have little trouble checking and extra checking and making sure they quite understood what they sign into.
All this does not mean that payday loan industry in Texas does need more changes in the regulation and that they do not happen. It is very likely that next to the House Bills 2592 and 2594 some other will follow. Right now in Houston payday lenders are not allowed to give loans in amount more than 20% of a person’s income and some other cities followed suit. It seems like permissiveness acquires more restrictive traits all the more.