Payday Loans [POLL]

Texas lawmakers are targeting payday lenders, but a bill that would limit payday loans is being criticized by some for being too weak. A Senate committee approved the bill yesterday, but critics say that this bill would do away with tougher ordinances in some cities in Texas. According to the Dallas Morning News:

The bill would limit the types of loans that could be offered and restrict how many times a loan could be rolled over. But it does nothing to cap the sky-high interest and fees borrowers can pay, which religious and consumer groups lamented.

About 3,500 payday and title loan storefronts have mushroomed throughout the state. They provide short-term loans that can reach 500 percent interest and lock largely low-income borrowers into a cycle of debt.

The bill would limit payday lenders to offering four kinds of loans and cap the amount of a loan based on a borrower’s income. For instance, those earning less than $28,000 a year could obtain a loan equal to 25 percent of their monthly income.

The bill allows for as many as 24 installment payments in a year, compared to the four allowed in the city ordinances’ limits. City representatives opposed the bill.

Carona acknowledged that the bill’s restrictions are much looser than ordinances in Dallas, San Antonio, Austin, El Paso and Denton. Houston also is considering an ordinance.

But the industry “has substantial support in this building,” Carona argued, and “this is the best we can get.” Payday lenders have spent millions on lobbyists and campaign contributions to state officials, records show.

The statewide restrictions could save borrowers millions of dollars in refinance fees, Carona said.

What do you think about this? Should the State just leave the payday lenders alone? Are these restrictions good enough or did lawmakers not go far enough?