Public opinion is clear. Join the reform effort today! A recent poll of Texas voters found that the public Charging desperate borrowers outrageous rates and understands the need for reform: fees is just wrong. But you can help turn things around. • 75% of all respondents support changing • Help us restore morality in the market by Texas law to cap interest rates and fees including effectively enforcing traditional law. 68% of Republicans, 82% of Democrats and 82% • Engage your local offi cials and call on them of Independents. to pass a city ordinance. • 85% of respondents believed that the appropriate • Join one of our coalitions as we seek to stop the rate for short-term in Texas should be 36% cycle of debt across Texas by advocating for new or less. laws in the State Legislature. • The top fi ve most popular words/phrases respondents used to describe these loans Who We Are were: “high interest,” “rip-off,” “expensive,” “interest rates,” and “scam.”

New Data Released Data collected in the fi rst half of 2012 and reported by the OCCC: www.texasfaithforfairlending.org Single Payment Payday Loans • More refi nances than new loans. Texas Baptist Christian Life Commission • Over 70% of borrowers had to rollover their loans. Texas Impact • Of those who refi nanced, 65% did so multiple Texas Catholic Conference times. • Average Fee = $22.90 per $100 borrowed – among highest in the nation. • Average of $473.35 costs $108.40 PAYDAY & every two weeks. www.texasfairlending.org Installment Payday Loans AARP Texas AUTO TITLE Lenders have been rapidly turning to multiple Texas Association of Goodwills installment payday loans – a 71.6% increase in volume Texas Appleseed from the fi rst to the third quarter. Center for Public Policy Priorities Average Fee RAISE Texas LENDING • $169 per $100 borrowed. Texans Care for Children Texas Association of Community Typical Loan A Debt Trap Texas Families Can’t Afford • An average loan of $576.72 costs the borrower Development Corporations a total of $1,553.97 in 98 days. • This is equal to a traditional single payment loan refi nanced/rolled over 7.4 times. Car • Over 25,000 cars taken from borrowers in fi rst Stephen Reeves three quarters of 2012. Director of Public Policy 512.473.2288 [email protected] What are Payday and Auto Title Loans? similar manner, but can cause even more damage, as the amount loaned is generally higher and the Payday and auto title loans are high cost, small-dollar car will be repossessed if payments are not made. loans offered to individuals without a credit check In Texas, a $4,000 auto title loan can result and little consideration of their ability to repay. in a borrower paying $1,200 per month in fees Payday loans are unsecured and simply require proof and interest for months on end, never reducing of employment and access to a account via the amount owed. a post-dated check or electronic ACH authorization. The initial term is typically two weeks, until after the How can this be legal? next paycheck. Auto title loans are secured by a car title; the amount loaned is based on the value of the In the past, such lending practices were illegal car and they have terms of thirty days. They are both and would have been the domain of neighborhood marketed on the basis of speed and convenience loan sharks. Today, large corporations making to people who feel they have no other options. billions of dollars off these loans have found ways to weaken or evade state usury laws. In Texas, What’s the problem with these loans? the state constitution declares that any loan not regulated by another statute with an APR The structure and high cost of these loans often of over 10%, shall be deemed usurious. The Texas trap borrowers in a cycle of debt where they Finance Code contains regulations governing oversight, examination and enforcement authority continually pay fees and interest but never pay these products which set generous limits on rates to the Offi ce of Consumer Credit Commissioner down the loan. In spite of the short initial term and fees. However, lenders desiring no limits for lenders operating as CSOs. The bill requires of the loan, borrowers can be stuck paying for whatsoever have found successive loop-holes quarterly reporting of important data and allows months on end. When combined, fees and interest to evade these basic safeguards. Lenders are for enforcement of fair debt collections practices, often reach annual percentage rates (APR) able to avoid Texas’ usury law by registering as as well as federal military lending laws. HB 2592 of over 500%. For example, a borrower who takes Credit Access Businesses (CAB) under the Credit provided for clearer notice and disclosures for out a $300 will owe $368 at the end Services Organizations code. The CABs set up a consumers to help borrowers make informed of the initial two week term. If they cannot pay storefront that collects only fees while a third party choices and allow for easier comparison with that full amount, they can pay only the fee and lender receives interest at or below 10% APR. This other similar, short-term credit products. interest portion of the loan, $68, and extend the lucrative, fabricated arrangement has led to an due date two more weeks and again owe $368. explosion of in Texas. There Local Response No partial payments of principal are accepted. are nearly 3,500 storefront lenders, more locations Absent signifi cant reform at the state level, Texas Fees are typically $20-$25 per $100 borrowed and than McDonalds and Whataburger combined. cities have taken the matter of predatory lending paying the fee to extend the term does not reduce into their own hands. Numerous cities have the principal of the loan. Data from states across Reform Efforts passed zoning ordinances aimed at limiting the the country show that the average cost for a $300 growth of storefront locations. These ordinances loan is actually $840. Auto title loans function in a There are efforts on the federal, state and local level to address the problem, but each attempt is met often stipulate that “alternative fi nancial services with well fi nanced industry opposition. Established businesses” (i.e., payday or auto title lenders) may in July 2011, the Consumer Financial Protection not be located within 1000ft of one another, within Bureau has the authority to regulate consumer 200ft of a property in a residential zoning district, lending across the country. While regulating this within 500ft of a major thoroughfare, and must market is a top priority for the Bureau, they have be in a free standing building, not a strip mall. only recently begun listening to consumer and In addition, the cities of Dallas, Austin, San Antonio industry representatives and conducting research. and El Paso have passed lending ordinances that Any nationwide rule promulgated by the CFPB attempt to stop the cycle of debt by limiting the addressing this problem is likely years away. amount borrowed and ensuring that payments During the 2011 session of the Texas Legislature, reduce the principal owed so that loans would Texas Faith for Fair Lending and members of the be paid off after only four payments. These cities Texas Fair Lending Alliance helped pass two bills were quickly sued by members of the industry aimed at reform. The bipartisan effort improved claiming they could not be profi table under such the regulatory situation in Texas, but did not regulations. More Texas cities, fed up with these address the exorbitant fees and interest rates that lenders, are considering similar lending ordinances lead to a cycle of debt. HB 2594 gave licensing, in spite of the threat of legal action.