HB 190: Ensure payday and auto-title lenders verify ability to repay before issuing a loan

Testimony by Rachana Chhin

Texas Catholic Conference of Bishops are in support of HB 190. The Texas Catholic Conference of Bishops have regularly advocated for payday lending reform in the last few sessions. This is rooted in both scripture’s exhortation not to lend at usurious interest and Catholic Social Teaching’s preferential option for the poor and vulnerable. We support HB 190 to ensure that payday and auto-title lenders verify the ability to repay a loan before issuance.

Our St. Vincent de Paul Society and Catholic Charities frequently serve Texans who hit a financial snag and need help paying for groceries, housing, utilities, or healthcare. We see that payday and auto-title loans consistently cause injury to these Texans. From 2013 to 2016, the TCCB transcribed hundreds of hours of conversations with these individuals. One of these clients, Evelyn, told us that she had two daughters who died within seven months of each other. She needed money for their medication and took out a payday loan. She told us:

“The loan was $380 and she’s been dead a year and every month I pay on it but it’s the same thing and never goes down. When you pay for five months, even though some of my notes are $85-100, then when five months are up, they tell me that I need to roll it over and it starts over as the same thing and I don’t get credit for all of the payments that I made during the five months.”

Stories like Evelyn’s aren’t unique. 2017 data from the Texas Office of Consumer Credit Commissioner’s 2016 and 2017 Credit Access Business Quarterly and Annual Data Reports shows that borrowers average 6 loans annually, spending 115 days in debt and 64% of this industry’s customers are re-borrowers. As a result of our experience in direct service, we seek to rein in predatory lenders who oppress the poor with excessive interest and loans designed to trap borrowers in cycles of debt. Payday and auto-title loans are marketed as short-term solutions that compassionately help Texans with unexpected expenses. However, this industry receives its revenue pri­marily from low-income, working Texans who cannot fully repay their loans due to excessive fees, despite making repeated good faith efforts to do so.

For these reasons, we support HB 190. This bill requires that payday and auto-title lenders verify that a borrower has the ability to repay a loan and thereby protect Texans from entering a predatory cycle of debt in the first place.