The Texas Catholic Conference of Bishops support HB 1134. We would like to thank Representative Craddick for filing this important bill to provide uniform statewide regulation for payday and auto-title lenders.
Frustrated with the lack of meaningful regulation by the state, cities throughout Texas have taken steps to pass a unified ordinance that puts in place basic protections such as principal pay down, assessment of the borrower’s ability to repay, and limits on refinance and referral. These cities have acted within their local authority, preserving the authority and right of the state to enact further reform to address the excessive fees.
Unfortunately, there are many unincorporated areas of Texas that lack the ability to pass this ordinance. In some parts of the state, lenders have sought to evade the local ordinances by transferring loans to stores outside of the city limits. This evasion could be minimized by passing statewide reform.
We urge the state to follow the lead set by 42 Texas cities and adopt the unified ordinance that these cities have passed, with a modification that addresses some limitation on the rate of growth in fees. Only the Texas Legislature or Congress can enact a fee limitation to make a meaningful difference in the lives of consumers.
Our parishes, Catholic Charities, and St. Vincent de Paul Society volunteers witness the high costs of these loan products every day as we assist families in alarmingly high debt when they take out a payday or auto title loan to cover an unexpected expense. Over the last four years, we have hosted listening sessions throughout the state to better understand address the cycle of debt created by these unregulated products of payday and auto title lending. Time and time again we heard the same stories of the cycle of debt these loans create. Due to the frequent fees and short term of the loans, repayment is difficult and a cycle of debt in inevitable. In our view, payday loans are set up so consumers fail. In the end, payday loans create greater financial burdens and hurt rather than help consumers.
We believe that the approach in HB 1134 is a reasonable model of payday lending reform that brings Texas closer to a short-term lending environment that allows for borrower and lender success. It does so by providing limits on refinances and the total cost of the loans based on borrowing limits. It also prevents the number of new and extended term products. This legislation clarifies refinance definitions and relies on the Office of Consumer Credit Commissioner for enforcement. This bill will accomplish reasonable statewide reform allowing all business and consumers in Texas to operate under the same rules.
In the teachings of our faith we have many warnings about usury and exploitation of people. Lending practices that, intentionally or unintentionally, take unfair advantage of one’s desperate circumstances are unjust. Catholic Social Teaching demands respect for the dignity of persons, preferential concern for the poor and vulnerable, and the pursuit of the common good. These principles coupled with our teaching on economic justice guide the call for reform of the current practices and Representative Craddick’s bill does just that.