NPT Juxtapose: Dueling press on payday lenders
Follow the jump for press releases from the office of state Rep. Marisa Marquez and from the Consumer Service Alliance of Texas regarding proposals to further regulate payday and/or short-term lenders.
From the office of Marquez:
Legislators, Public Interest Group Push to Protect Texans
Consumers Hurt by Bad Actors in Credit Industry
AUSTIN, TX- Several state lawmakers today unveiled HB 3744, a bill that ensures a level playing field for all Texas consumer lenders. Their announcement coincided with the release of a new report from Texas Appleseed urging state licensing and regulation of payday lenders.
State Representatives Joe Farias, Carol Kent, David Leibowitz, and Marisa Marquez joined Texas Appleseed Senior Policy Analyst Ann Baddour and Don Baylor of CPPP at a press conference today to unveil their core legislative principles and highlight the report.
Earlier this session the representatives filed separate bills to address the unregulated payday loan industry problem. At today’s press conference, they unified behind a set of reforms (see attached one-pager) needed to protect Texas borrowers and ensure fairness in the lending industry. The legislators designed their legislation to attract broad, bipartisan support. Texas Appleseed’s new report starkly illustrates the need for new legislation, showing that payday lenders utilize a loophole in state law that allows them to operate as credit services organizations (CSOs) and avoid state regulatory oversight, licensing and consumer protection required of other lenders.
“We need to have clear ‘rules of the road’ for CSOs, a cop on the beat to enforce those rules, and some strong safeguards for Texas consumers,” said Rep. Marquez.
“Texas payday loans are among the most expensive in the country. We found that the majority of payday borrowers are low- and moderate-income women and minorities, many of them single mothers. Nearly one in 10 of surveyed payday borrowers uses these high-cost loans monthly-and nearly 60 percent reported rolling over their loans, which can trap consumers in a destructive cycle of debt,” said Texas Appleseed Senior Policy Analyst Ann Baddour.
Rep. Farias added, “The time is now to deal with this unregulated lending market. We need to be sure that lenders are helping and not hurting.”
From the Consumer Service Alliance of Texas:
Short-Term Credit Industry, Consumer Choice Advocates
Back Meaningful Reform That Protects Consumer Freedom
AUSTIN, Texas (April 8, 2009) – Ensuring that hardworking Texans continue to have access to short-term credit should be part of any legislative effort that imposes additional regulation on Credit Service Organizations (CSOs) in the Lone Star State, consumer choice advocates and industry representatives said today.
“Small, short-term lenders in Texas are not opposed to additional, meaningful oversight,” said Alex Vaughn, president of the Consumer Service Alliance of Texas (CSAT), a trade association representing the interests of consumers and CSOs across Texas. “Our members look forward to working with lawmakers on reforms that will continue to protect Texas consumers without taking away a meaningful financial choice.”
CSOs provide retail financial products and services to Texas consumers. From stores in neighborhoods across the state, hardworking Texans have access to small, short-term loans; money orders; pre-paid telephone and debit cards and other services to help them manage their finances.
One of the services CSOs provide is securing an independent third-party lender for customers who need small, short-term loans to meet their immediate financial needs. CSOs do not directly provide loans to consumers.
Michael Price, executive director of the Texas Coalition for Consumer Choice (TCCC), said short-term credit plays an essential role in the Texas marketplace and can be a much more cost effective way to help families meet an immediate financial need than, for example, bounced check fees, late fees and reconnect fees for utility bills and credit card charges.
“Short-term borrowers must have bank accounts and jobs. Like most Texans, they are educated and carefully evaluate the credit terms available to them,” he said.
“Continued access to small, short-term loans is vital for many Texans. While our mission includes helping TCCC members budget and save, circumstances often dictate that they borrow responsibly. Our experience shows other lenders cannot meet their needs,” Price added.
Last year, credit service organizations formed CSAT to help educate their customers, facilitate communication among members, and foster meaningful dialogue with policymakers.
CSAT adopted a set of industry best practices that ensure member companies hold themselves to a higher standard of responsible service and help customers make better financial decisions. Among the best practices, all members are required to disclose fees in terms of both an annual percentage rate and a dollar amount.
Another significant step for members was to agree to post notices in all member stores to clearly inform customers that criminal prosecution will not be threatened if they cannot repay their obligation; only lawful collection practices according to state and federal law will be followed; and every member store will maintain a toll-free 800 number for complaints, and a response will be provided for every complaint.
“We also encourage our customers to budget responsibly. We teach them how to save so they will not have to borrow for every financial emergency. But, we firmly believe consumers should have a variety of choices when deciding how to meet individual and family needs,” Vaughn said.