Payday Update: Unregistered and Unregulated, Payday Lenders Put Consumers at Risk and Flout Texas Usury Laws

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Don Baylor /(512) 320-0222 x 108

August 15, 2005

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Since Texas lawmakers defeated HB 846—an industry-backed bill that would have tripled the interest rates on short-term “payday” loans—the Texas payday lending industry has adopted another business model to evade state and federal regulation. In July, Texas-based payday lenders regrouped as businesses operating under Texas’ Credit Service Organization Act. As a Credit Service Organization (CSO), a payday lending company dodges both federal guidelines restricting payday loans and the interest rate limits established by the Texas Finance Commission (TFC). Meanwhile, a recent TFC study demonstrates how Texas consumers are being gouged by these high-cost, short-term loans.