News & Resources

Texas short term bill doesn't address loophole

May 20, 2011 Todd Milner

In Texas, a bill meant to provide consumer protection from short term and car title lenders was recently passed, according to The Midland Reporter-Telegram. The legislation passed in the Texas House of Representatives 84-50, and was filed by Republication Vicki Truitt. "The problem is that all bills introduced to date will put some legitimate operators out of business," Truitt told the media outlet. "There is a market for short-term loans. Consumers will not be well served by eliminating these sources of short-term and unsecured loans. The alternative for them will be even worse." The alternative Truitt refers to are the extra charges and interest rates added onto to short-term loans when they aren't paid back in full. According to Republican Tom Craddick, individuals are often re-paying their loans at rates of several hundred percent, which is especially burdensome since the average borrowers' annual income is less than $20,000. Craddick tells the news source that many short-term financers operate as credit service organizations because it allows them to fall into a loophole where they don't come under the same oversight required of financial institutions. Your News Now points out that several other bills died at the Texas House's midnight deadline last Thursday, including House Bill 400, which deals with increased class sizes and unpaid days off for teachers.