Travis County Commissioners Court
Tuesday, December 7, 2010,
Item 3
Item number 3, consider and take appropriate action on a resolution supporting the passage of legislation regulating payday auto title and other unregulated consumer lending businesses in the 82nd Texas legislature.
Commissioner Eckhardt?
>> thank you so much for bringing this issue to our attention and asking for this resolution.
we have several people here who would like to testify in favor of the resolution.
would it be beneficial to y'all to kick off -- kick it off by reading the resolution out loud?
would that be useful?
whereas the Commissioners court of Travis County is deeply concerned about the harmful effects of payday and title lending practices within our community with loan fees and rates often in excess of 500 percent annual percentage rate and whereas the typical payday or auto title borrower has a median house hold income between 25,000 and 50,000, the income range of many Travis County households.
and whereas in Travis County there are over 100 of these unlicensed and unregulated lending storefronts that threaten the financial future of families already struggling to make ends meet.
and whereas a Texas survey found that those who utilize title lending do so to cover such basic necessities as paying utility bills, buying groceries or gas, paying home rent or mortgage.
and whereas the loans have been documented to create an ongoing cycle of debt, amounting to a cost of $840 for a 300-dollar loan.
and whereas 17 states and the district of columbia have adopted a 36 percent or lower annual percent rate cap for these small loans and the federal government has adopted a similar rate cap for payday and auto title loans to the military, based on the department of defense finding that these loans, quote, undermine military readiness, harm the morale of troops and their families and add to the cost of fielding an all voluntary fighting force, end quote.
and whereas we see a crisis in our community and we need action at the state to enforce fair lending standards in Texas.
now therefore be it it solved that the Travis County Commissioners' court urges the state legislature, the governor and the lieutenant governor of the state of Texas to take action in the next regular session of the state lawyer in 27 to enact laws that will close the loophole in state law that allows payday auto title and other consumer loans to carry annual percentage rates upwards of 500 percent.
and two, provide a level playing field by requiring all lenders and brokers of payday auto title or other consumer loans to be licensed.
and to comply with the same standards and consumer protection laws of licensed lenders under chapter 342 of the Texas finance code.
and three, create a system to collect consumer loan data from lenders and brokers of consumer loans to ensure that these businesses engage in fiscally sound lending that supports the well-being of our communities.
and for create programs that promote financial literacy among the population of people who use payday, auto title or other consumer loans.
thanks again for being here and you all know so much more about this issue, which is really running rampant, particularly in urban areas in the state.
thank you for being here.
>> I like the fact that Commissioner Eckhardt has already read most of what I was going to say, but it is one of our -- I will try to be brief.
it is one of our top legislative priorities.
at the present time we're working with a senator and a rep that will be carrying the bill -- a bill that has the same language as what the Commissioner read.
we do know that at least 20% of the borrowers in Texas are people from ages 50 on up.
and most of them, as Commissioner Eckhardt as pointed out, the loans are taken out for basic, basic necessities.
and of course, unlike other lenders, they're not regulated and we know that they found a loophole in the law and they operate as cso, credit services organizations.
all they have to do is pay a 100-dollar annual registration fee and they're not subject to any kind of regulatory examinations or oversight.
and we find that to be a very, very severe problemfor a lot of the citizens here in Texas.
just a few statistics.
four years ago there was only a thousand of these ceo's.
in the past two years that number has grown by 2,000.
so we now have 3,000.
at least 3,000.
and there are more coming up every week, every week there are more people setting up shop because it's such a lucrative business for the owners of those particular shops.
and the problem is that the loans are taken out for a two-week period.
so if you take out a 200-dollar loan to pay medical expenses or medicine for your ill child, then usually the interest would be $40 for a two-week period.
at the end of the two-week period if you only have $180 to pay, they won't take that.
they'll only take the $40 interest fee.
and then they roll it over for another two weeks, and so then two weeks later after having paid the first $40 you now owe $240 again.
and if you can't pay the full amount, then you roll it over.
and she was correct in saying that the average rollovers are nine times.
so people just keep rolling and rolling and rolling.
and that's the problem.
and that is what causes the 500 percent interest rate per year.
if you take out an auto loan for $4,000, usually the interest rate is a thousand dollars.
so then if you can't pay 5,000, then you just keep rolling it over, rolling it over and eventually they repossess your automobile.
and that's what's going on in this state.
and we are very thankful that you have placed this resolution on your agenda and we hope that you will see fit to pass it.
there are many municipalities and counties here in Texas that have already passed this resolution.
and from san antonio to richardson to mesquite to brownsville all over the state, and this is a very severe problem affecting our most vulnerable citizens here in this state.
so aarp would certainly thank you for placing it on the agenda and hope that you do pass this resolution.
and there will be, I understand, a press conference on Friday Friday announce an announcement by the state senator and the state rep who will carry the bill that uses the language that Commissioner Eckhardt referred to.
thank you very much on behalf of aarp's members.
>> thank you.
>> yes, sir.
>> yes, thank you.
my name is woody woodrow and I am the executive director of a statewide organization called raise Texas.
we are a coalition of for-profit, nonprofit and corporations involved in helping people move forward financially.
and we are here to speak in support of the resolution because we feel that the loophole that was created for these payday and auto title lenders is not doing a service to our communities, but doing a disservice.
it's creating a product that seems to be helping people, but in the long run is creating a lot more problems in terms of people not being able to pay it back.
so just briefly, we are 100% behind support and we've been travelling around the state and we've had regional meetings.
so what's happening in Travis County is happening in communities.
we've gone to in east Texas and in west Texas and in urban and small cities and rural communities.
and so we're hoping that you pass this resolution and that we're able to get the state to regulate payday and auto title lenders.
thank you.
>> thank you.
>> my name is anne and I work for Texas apple seed.
we're a nonprofit statewide organization based here in Austin.
and we work for social justice issues across the state of Texas serving primarily low and moderate income communities.
and we're here also in support of this resolution and we're part of a coalition called the 500% interest is wrong coalition.
it's a simple message.
there are over 60 member organizations from across the state.
we have a Commissioners' county Commissioner as one of the coalition members and it's all behind this very simple proposal that no business should be allowed to operate outside the law.
and this cso loophole is doing just that.
it's enabling a 3 billion plus lending industry in Texas to operate outside of consumer credit regulations.
the proposal just basically pulls them under the laws that the Texas legislature has passed to govern consumer credit transactions.
there are a large number of licensed lenders, and many of these cso operators are licensed also as pawn brokers.
so they're choosing to follow the law in one component of their business.
why not follow the law in all components of the business.
it's simple.
and if you look at the handout, it shows in the second and third page the rates that these businesses are charging right now, which is for payday loans over 500 percent -- and we've seen rates as high as 700 percent apr for fully secured one month loans that are secured by the title of an automobile, rates that range from 250 to almost 400 percent apr.
and as my colleague from the aarp noted, that that amounts to a 4,000-dollar loan, about $1,000 in fee payments every month on the loan, without reducing the principal amount.
and if you look at the next page it shows you what the regulated loan rates are.
and those are really quite generous rates ranging from 300 percent apr for a $100.14-day payday loan to 100% apr for a 500-dollar payday loan.
you can see the rates that would cover auto title lending as well.
there's no reason why this industry should be allowed to function outside the law and it's already been documented through other testimony how it can hurt a lot of our communities and hurt the economic stability of our families, particularly in these tough economic times.
I urming you all to support this -- I urge you all to support this resolution.
>> thank you.
>> yes, sir.
>> don burial junior, senior policy analyst with the center for policy priorities.
we're a statewide organization that advocates on behalf of low and moderate income texans.
from our perspective we certainly see this product, whether or not you're talking about payday loan or auto title loan, as a product that destabilizes working families.
not only the cost of the product itself, but also the way in which it's collected.
many individuals do not have the ability to repay.
so we see the violation of the ability to repay standard as one major reason why you should really support this resolution.
in addition, we also believe that it counter acts really kind of productive consumer spending.
when we talk about the money that is paid in fees to these lenders, we're not talking about a product in which this entity is collecting sales tax.
and so for counties and cities and for the state of Texas in particular, which is a concern about revenue, in many ways this is money that effectively leaves your community and in many cases never comes back.
and so thirdly, we also believe that this is a product that goes against the values of Travis County and the values of this community.
so we urge the Commissioners to adopt this resolution and we support this resolution as well.
thank you.
>> thank you.
>> good morning.
my name is yandis banks, from the naacp.
and I?m with this group as well and I agree with everything they said.
I know even recently we've received communication from a single mother who has a 14-year-old daughter who she's taken out a payday loan and is very worried, I need to get back with her and see, but she was fearful that she would not be able to pay back the interest, the rollover.
she's been doing it for awhile, but times are hard when she took is out and times have gotten even harder.
she tried to communicate with the lenders and say can I do some of it or something.
they're like no, pay us our money now and you can pay rent later on.
so she's worried about you could be evicted, she could possibly lose her job.
she could go to jail for writing bad checks.
they're saying write the check to the payday lender and they hold it as a postdated check and then ship it off to the bank.
depending on how much money it is, you could have a warrant for having written bad checks.
and that was the concern of hers.
so we definitely noted these loopholes that need to be close and we commend you for passing this resolution.
thank you.
>> thank you.
is barbara budd still here?
>> barbara had to leave for another engagement, I believe.
thank you so much for your --
>> I second the motion, Commissioner, whenever it comes up.
let me say this to you.
I applaud each and every one of you for being here to testify on behalf and support of this particular resolution.
the state will have to make sure that the stay legislative level that this particular opportunity passes.
and of course, victims of this particular situation is very pervasive throughout the poor community of Travis County we have folks that are located all over the county that qualify as far as being poor.
and this is one of the outlets that they use because of their poor conditions.
never able to escape this type of scenario.
unfortunately the county can't basically do -- change the law per se.
it will take the state legislature to do that.
of course, whatever we can do to make sure that happens through this particular resolution -- was there an associated bill number from the senator?
I know the house bill I think is hb 212?
>> it's -- it's representative rodriguez's bill.
>> from representative rod by gez.
but I was wondering if there was an accompanying senate portion of that.
>> I think there are several bills that have been filed.
two specific ones that have our language that we all agreed to.
there's a state rep and a state senator, but I would rather not difficult vulg who they are at this time because they're going to have a press conference on Friday.
even though you can't do anything about it, a resolution from Travis County carries a lot of weight in the legislature.
it really does.
we would really appreciate t.
>> no.
I wasn't speaking -- I?m saying as far as lawsuit is concerned.
the law make us have to do that.
I want to make sure you understand it.
we're doing what we can do from this end.
I want to make sure that's what's happening clearly.
there are persons that will not comply to if the law actually passes and it becomes law.
what type of penalty setup have been associated with noncompliance?
and the reason why I say that is because there are things that come outside of the law.
what are the penalty phases for persons that will not adhere to what this would probably end up being if the law passes.
is there a penalty phase that we're awear of?
>> it would be a criminal if the law stated.
>> in other states there's always shenanigans that happen after a law is passed, and it requires effective enforcement not only of the state regulator, but also the attorney general as well.
so we really need that as well.
>> right.
we hopefully are plugging in the loopholes in the law, but again, if there are -- it would be good to know if there's a penalty phase because actually solicitation from some of these predators -- I call them predators on the poor are actually even given through mail.
in other words, the mail even comes to residents' homes.
encouraging -- involving these particular loan practices.
and these folks are unaware of the consequences of what they're getting into.
so again, I aplawd you, I applaud Commissioner Eckhardt.
I applaud the representative rodriguez for this initial step because I think it's a good step in the right direction.
but I think the penalty ought to be so severe that folks don't want to practice this in Travis County anymore.
I really -- I am really looking for the big penalty phase, the big hammer to make sure that folks will not violate the poor in this community.
>> Commissioner Eckhardt moves approval and Commissioner Davis seconds.
>> it does matter to have these local resolutions because great work has been done in the previous legislation by senator Davis, senator wendy Davis out of fort worth, I believe.
some amazing work was done and we're so very close.
the language is so well vetted that there's no reason for it to pass except for bare knuckle politics.
thank you very much.
>> all in favor?
that passes by unanimous vote.
keep up the good work.
>> thank you very much.
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Last Modified:
Tuesday, December 7, 2010 1:33 PM
