Texas Payday Loan Law and Legislation

Texas Payday Loan Regulations
Legal Status
Legal
Interest Rate (APR)
662%*
Maximum Loan Amount
Not Specified
Minimum Loan Term
7 days
Maximum Loan Term
Varies
Finance Charges
>$30 = $1 for each $5
$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

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

Credit Access Businesses in Texas can provide loans by the state regulations lined in 7 Tex. Admin. Code and Tex. Fin. Code Ann. §§342.251 et seq.

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. 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.

Payday Loan Amount in Texas

Currently, the maximum amount a person can borrow from a Texas payday loan lenders is not specified.

Rates, fees and other charges in Texas

There is no fixed maximum financing fee in Texas, however, according to state regulators it is rather high – 662% APR (*According to the Center for Responsible Lending 2019: “Typical APR based on average rate for a $300 loan advertised by largest payday chains or as determined by state regulator, where applicable.”).
  1. on a cash advance of less than $30, an acquisition charge that is not more than $1 for each $5 of the cash advance;
  2. 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
  3. 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 the cash advance.” (Fin. Code Ann. §§342.251)

Maximum Term for a Payday in Texas

  1. for a loan of $100 or less, the lesser of:
    • one month for each multiple of $10 of cash advance; or
    • six months; and
  2. for a loan of more than $100, one month for each multiple of $20 of the cash advance.” (Fin. Code Ann. §§342.251)

Consumer Information

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.
  • 2011Credit 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 them were 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 intending to invalidate the Payday Loan Rule; no changes so far.

(As of April 2019)

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