Senate, House panels debate measures to curb payday lending

The hearing on payday lending in the House Investments and Financial Services Committee on Monday was so uneventful as to practically guarantee the Senate version of the bill would be the one worth following.

 

The House has a number of bills on aspects of payday lending. The Senate has an omnibus bill that has passed out of committee and is headed to the floor.

 

Rep. Tom Craddick, R-Midland, dean of the House, carried the most important House payday lending bill: House Bill 2019. It was presented in committee Monday.

 

As Craddick pointed out, Texas has more payday and auto loan lending businesses than any other state. The usury issues have gotten so bad that cities like San Antonio and Austin have moved to put ordinances in place to regulate payday lenders. The state’s intention to regulate the industry, and trump local ordinances, has been a source of ire for cities and the Texas Municipal League, especially in the Senate version of the bill.

 

“This is a serious problem in this state,” said Craddick, the one-time House Speaker who admitted he passed a bill four years ago that gave payday lenders a loophole. “I think it’s really weird for us, to be the state that’s doing the best economically in the country; yet we are one of the states in the worst shape in the country when it comes to consumer loans.”

 

Various members of the faith community, many who also appeared before the Senate Business and Commerce Committee, were in attendance to support Craddick’s bill. Craddick said he found it interesting that the payday lenders never got up to speak; most filed cards, simply noting they were in opposition to the bill.

 

Craddick’s bill was left pending in committee. At the end of March, Chair Sen. John Carona, R-Dallas, rolled out his own version of a payday lending bill, and it provided a standing-room only crowd of cities, lenders and faith leaders.

 

The media has been less than pleased with Carona’s efforts on payday lending reform, a task that has felled a number of lawmakers before him. When Carona rolled out Senate Bill 1247, he admitted no one would be entirely pleased, but he was comfortable the bill that could pass the Senate.

 

In its introduction, Carona talked about three different stakeholder groups: the lenders, the faith community and the cities. Carona, a Republican, noted that businesses deserved profits, but not so much as to burden those taking loans.

 

“This is a work in progress,” Carona said when he introduced the bill, describing all sides in the issue. “Our job is to try to put together these three different groups and come to a consensus view on what constitutes progress.”

 

Carona said his goal was to “spread the wealth.” That still left cities, with much more stringent guidelines, less than satisfied. Carona insisted that state regulation, regardless of its limitations, would be better than city ordinances that would be attacked repeatedly in court.

 

Carona’s bill would make sure loans correspond properly to the applicant’s income or the value of the vehicle. He also put limits on the number of times a consumer could refinance a loan. The loan would be limited to income or auto value.

 

The bill also mandated the use of extended payment plans. Consumers would be limited to the number of outstanding loans and the number of rollover loans. The goal would be “to protect consumers from the cycle of debt,” Carona said.

 

The faith community, led by Texas Impact, continues to support Carona’s version of the bill, which is expected to hit the Senate floor this week.