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Payday Lending in El Paso

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On Tuesday, the El Paso City Council has decided to take another look at an ordinance that was first passed a year ago to enforce regulations for consumer access businesses, or companies that give payday loans or auto title loans. The council is supposed to let the ordinance happen later this month. It was officially passed in January of 2013, with July 1, 2013 being the effective date. In July, the city decided to postpone the effective date until January 16, 2014, so that they could give time for the newer members to be able to review the ordinance. The Texas Legislature has decided to refuse to regulate the payday loan industry. Sen. John Carona, R-Dallas, explained why the Legislature was so reluctant, and was quoted last year as saying: “This industry is in business and this industry has amassed enormous political support at the Capitol.”

Of course, the support was gathered mostly through millions of dollars in contributions to the campaign.  The state’s lack of action has caused further regulation of consumer access businesses to municipalities. Houston, Dallas, Austin and San Antonio have all passed ordinances regulating this business as well. The El Paso ordinance is not too terribly burdensome. The main component is to limit the refinances of the loans. A refinanced payday loan is not able to exceed 20 perfect of the monthly income of the borrower. For an auto title loan, the refinance limit is less than three percent of the borrowers annual income total, or 70 percent of the vehicle’s retail value. Loans that must be repaid in a single large sum, which applies to the majority of all payday loans in El Paso , can not be renewed more than three times. Critics feel that the renewal charges are one of the main problems with these loans. Some borrowers will become trapped in a cycle of debt and renewal fees and will go months being unable to put a dent in the loan.

The usual single payment payday loan in El Paso would have an 18 day prepayment term. For a title loan it would be about 32 days, according to the Texas Office of Consumer Credit Commissioner. Data from the OCCC states that in 2012, the most recent year of statistics, El Paso Payday lending businesses made almost 89,000 loans, which adds up to over $50 million. On average, a loan would be refinanced 1.35 times before being paid off. The loans earned the lenders over $34 million in loan fees. This means that an average El Paso customer was given a loan for $564, then paid the lender $387 to have the money for less that two months.The El Paso city regulations are doing little to help with this.

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