Texas Payday Loans: Law, Stats and History

Texas Payday Loan Regulations
Legal Status
Legal
Interest Rate (APR)
can exceed 400%
Maximum Loan Amount
Not Specified (on average $800)
Minimum Loan Term
7 days
Maximum Loan Term
180 days
Number of Rollovers Allowed
No restriction (no more than 3 if City Ordinance was adopted)
Number of Outstanding Loans Allowed
Not Specified
Cooling-off Period
None
Installment
Yes
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

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 (APR can be more than 400%). Fees and other charges applicable to the loan vary regarding the loan amount.

Texas has 2 types of payday loans: single (due within two weeks or one month) and multiplies installment loans (due within 6 months).

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; In 2016 Texas held 23% (#1 position) of the total American payday loan market. But the situation is changing due to the adoption of restrictions by cities despite the Texas lending law.

Lending City Ordinance

Since 2011, more than 45 cities in Texas have passed the unified payday loan ordinance that is stricter than the state law.

The main features of this ordinance are:

– Payday loan lenders (credit access businesses) must have a license in the city;
– Lenders are required to keep a record of every loan transaction;
– Amount of loan (with fees) cannot exceed 20% of the client’s gross monthly income;
– No more than 4 installments and 3 rollovers;
– Repayment of at least 25% of the original loan amount;
– $500 fine for breaking the rules.

Cities that passed ordinance: Amarillo, Arlington, Austin, Baytown, Beaumont, Brownsville, Bryan, College Station, Corpus Christi, Dallas, Duncanville, Edinburg, El Paso, Fort Hood, Fort Worth, Garland, Greenville, Harlingen, Houston, Irving, Killeen, Laredo, Little Elm, Lubbock, McAllen, Mesquite, Mission, New Braunfels, Plano, Port Arthur, Richardson, Round Rock, Sachse, San Antonio, San Marcos, Sugar Land, Temple, Waco, Weatherford, and others.

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.

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 – 400+% 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 a 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)

Loan Term

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

Repayment

The borrower can repay the loan in full before the due date. The lender must return fees that were not earned (RULE §83.604).

Consumer Information

Attention
From July 2020, lenders are not required to check a borrower’s ability to repay a loan.
Be careful, evaluate your financial situation, don’t get into a debt trap.
The rule was changed by the CFPB.

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).

Regulator: Complaints & Information

Texas Office of Consumer Credit Commissioner

Address: Finance Commission Building, 2601 N Lamar Blvd, Austin, TX 78705
Phone: 512-936-7600 or 800-538-1579 (helpline)
Url: https://occc.texas.gov/
File a Complaint: https://occc.texas.gov/consumers/file-a-complaint

OCCC regulates payday loans (< $1,340) under Chapter 342 Subchapter F (Texas Finance Code Chapter).

Number of Texas Consumers Complaints by Topics

According to CFPB Consumer Complaint Database

  • Fraud and threat ( 1210 )
  • Not exiting debt ( 809 )
  • Charges from account ( 491 )
  • Credit rating ( 243 )
  • Not requested loan ( 225 )
  • Lender is not available ( 198 )
  • Loan to return ( 189 )
  • Loan not received ( 62 )

The Quantity of Top Texas Stores by Cities


Statistics

YearNo. of StoresNo. of Clients, millionNo. of Loans*, millionValue of Fees, billionValue of Loans**, billion
20123,4551.42.7$0.9$4.4
20133,5851.52.5$1.1$4.0
20143,4981.42.5$1.2$3.9
20153,1531.42.4$1.2$3.8
20162,5521.42.3$1.2$3.6
20172,1981.32.2$1.4$3.5
20182,0291.32.1$1.4$3.4
20192,0181.42.3$1.5$3.6
* Just for new loans
** Total dollar volume of payday loans (original amount of loans, fees + refinances)
Stats provided by Texas Office of Consumer Credit Commissione

The History of Payday Loans in Texas

  • The 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 – The loan reform was started. As the first step: Credit Services Organizations (CSOs) were now called Credit Access Businesses (CABs).
  • 2012 – As a result of reform, municipalities in Texas started to pass zoning ordinances to restrict payday lending operations, 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”.
    – Houston passed the payday lending local ordinance. This reduced the number of lending stores by 4 times after 3 years.
  • 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 hadn’t yet fully come into effect.
  • 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.
  • 2020 – For the past 10 years, Local City Ordinances have been adopted by 45 cities in Texas.

[Updated As of December 2020]

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