$30 – $100 = 1/10 of the loan amount + $3 /mo (<$35)
$35 – $70 = $3.50/mo + $4/mo (>$70)
>$100 = $10 + $4/mo for each $100
Payday loans are considered legal in the state of Texas.
Texas has no specified maximum loan amount that borrowers can take. There is no fixed maximum financing fee either (thus, average APR is rather high – 662%*.) Fees and other charges applicable to the loan vary in regard to the loan amount. No roll-overs are allowed and the maximum loan term also depends on the loan sum.
As a matter of fact, Texas has very relaxed payday loan legislation that allows the industry to flourish. This results in large numbers of payday loan storefronts in the state and also the number of lenders per 100,000 people.
Texas Payday Lending Statutes
All Payday Lending Texas Statutes:
- Tex. Fin. Code Ann. §341.001
- Tex. Fin. Code Ann. §342.007 and §342.008
- Fin. Code Ann. §§342.251 et seq.
- Fin. Code Ann. §342.601 et seq.
- Fin. Code Ann. §393.221 et seq. and §393.604 et seq.
- 7 Tex. Admin. Code §83.6004 and §83.1001 et seq.
Regulations apply to both online and storefront loan providers. In order to operate in the state, lenders have to comply with the following regulations:
- All lenders must be licensed.
- All lenders must disclose all the loan information (terms, interest, fees, repayment period) before the loan documents are signed.
Loan Amount in Texas
Rates, fees and other charges in Texas
- “on a cash advance of less than $30, an acquisition charge that is not more than $1 for each $5 of the cash advance;
- on a cash advance equal to or more than $30 but not more than $100:
- an acquisition charge that is not more than the amount equal to one-tenth of the amount of the cash advance; and
- an installment account handling charge that is not more than:
- $3 a month if the cash advance is not more than $35;
- $3.50 a month if the cash advance is more than $35 but not more than $70; or
- $4 a month if the cash advance is more than $70; or
- on a cash advance of more than $100:
- an acquisition charge that is not more than $10; and
- an installment account handling charge that is not more than the ratio of $4 a month for each $100 of cash advance.” (Fin. Code Ann. §§342.251)
Maximum Term for a Payday in Texas
- “for a loan of $100 or less, the lesser of:
- one month for each multiple of $10 of cash advance; or
- six months; and
- for a loan of more than $100, one month for each multiple of $20 of cash advance.” (Fin. Code Ann. §§342.251)
In case of fraud or any illegal action from a lender, Texas law requires that the issue was resolved with a lender first. However, in case of a failure, there are two regulatory bodies to turn to.
The major regulatory body in Texas is the Texas Office of Consumer Credit Commissioner (OCCC). It regulates businesses that offer various small cash loans in Texas. To file a complaint against your lender via OCCC, you should visit their website and complete the complaint form. Do it either online or download and then send it to them by mail. Here is to remember that such complaints become public record.
Another way to find legal information and seek assistance is the Texas Attorney General’s office. You can also file a complaint with them here (in the same way as the above one).
The History of Payday Loans in Texas
1990s– Early in the 90s payday loan practices were illegal in Texas.
- 2001 – The Texas Legislature adopted payday lending standards under the authority of the Texas Office of Consumer Credit Commissioner (OCCC). However, lenders in Texas found ways to circumvent state limits: a usury cap of 10% interest and a maximum 136% APR rate for a 2-week, $300 loan. Payday lenders managed to find a loophole where they became “Credit Services Organizations” (CSOs). They did so by claiming regulation under the Texas Credit Services Organizations (CSO) Act (passed in 1987). Thus, they went on charging excessive fees to loans.
- 2001 – 2004 – The growth and flourishing of the industry.
- 2004 – 1,300 storefront payday lenders in Texas.
- 2011 – Over 3,400 CSO locations were registered.
- 2011 – Credit Services Organizations (CSOs) were now called Credit Access Businesses (CABs).
- 2012 – More than 40 municipalities in Texas passed zoning ordinances to restrict payday lending operation, among
themwere Dallas, Austin, and San Antonio.
- 2013 – The Legislation failed to pass a very important bill thanks to the lawmakers’ disagreement on law details. However, 2011 measures passed and payday lenders were now required to be state-licensed and to “post a schedule of fees in a visible place”.
- 2015 – Arlington passed the Texas Municipal League’s model ordinance that had already been adopted by 27 other cities. (The main restriction was an interest rate cap of 20% of a borrower’s gross monthly income.)
- 2016 – Hurst, Euless, and Bedford followed suit. Fort Worth remains the largest Texas city not to have one.
- 2015 – None of more than 40 bills addressed to payday loan problems made it out of committee (and only H.B. 411 about Telemarketing tactics passed House 5/6/15. It“prohibits a credit access business or its representatives from making a telemarketing call.”)
- June 2, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed a Payday Loan Rule that hasn’t yet fully come into effect (expected in November 2020).
- 2018 – Community Financial Services of America and Consumer Service Alliance of Texas jointly filed a lawsuit against the federal Consumer Financial Protection Bureau with the aim to invalidate the Payday Loan Rule; no changes so far.
(As of April 2019)