ThePolicies Concerning Payday Loans in Texas and Nationwide
NewTexa’s payday lending regulations
Paydayloans refer to the small amount of money that is lend to the workers,and it is secured by the next paycheck (Garemko & Michael, 213).In 2011, Texas legislature passed two bills regulating the practiceof payday lending, that is, H.B2592 and H.B. 2594. The bills wereeffective from 01/01/2012, and some of the regulations and policieswere issued by the finance commission of Texas. This report paperexamines the attention and the powers of the commission to the newpolicies and coming up with an innovative approach that was derivedfrom the other states across the world. The legislatures in Texasassociates payday loan with three components that include cashadvance, check amount and finally the signatory of the personrequesting the loan.
In2013, the Texas legislature again tried to pass the law regulatingpayday loans but the amended bills failed to gain approval in theHouse (Ted, 755). Payday loan rules provide that the customer couldtake out 130 if his/her monthly income is below a reference dollaramount and a loan have been capped at 25% of the income. If theincome exceeds the reference dollar amount, the customer is eligiblefor up to 35% of the income.
Paydayloan program has been greatly criticized by the consumers in most ofthe countries due to its biasness and predatory behavior (Garemko &Michael, 214). The loan is associated with high effective interestover a short period of time and therefore, consumers consider it asexploitative. The government of Texas could have, therefore,considered engaging into a conversation with the consumers and thepayday lenders with an aim making the loan more effective. The Officeof Consumer Credit Commissioner (OCCC) should also be granted powersto enforce the provisions governing the payday loans (Garemko &Michael, 243).
Texascities respond to payday lending
Texascities have developed legislatures that require licensing anddisclosures payday lending bills. The most characteristic of thecustomers of this loan is the desire to obtain credit. Most of theconsumer may have no other option apart from the payday loan due toemergency and other reasons. The majority of American workers arelow-income earners who even lack a regular saving program from whichthey can withdraw to cater for the unexpected expenses. A recentresearch has shown that two-third of the payday lending consumershave got at least $1,000 in liquid assets. Payday loans have alsocome to sustain the consumers budgeting and also to cater for theprioritized bills that result to quick cash need.
Thepayday bills attempt to offer more regulations that require theconsumers to limit the number of rollovers to four (Ted, 748). As itwas mentioned earlier, most of the payday borrowers are low-incomeearners, and they cannot afford to settle their loans fullypermanently. Due to this reason, most of them are forced to rolloverthe loans to the next paycheck after just paying the interest forthat particular period.
Nationwideregulation of the payday lending compared to Texas
Manystates and the policy makers have tried to control the operations ofthe payday lenders. The evidence from Dodd-Frank and the consumerfinancial protections Bureau have played a great role in developingthe regulations governing the loans (Marta et. Al, 1025). The loansshould be meant to help the consumers but not to harm them throughexploitation. With the current situation, the bureaus in variouscountries are paying more attention to the payday lenders. Theregulations of the payday loans have also taken various forms at thestate level. However, according to the Skiba, Paige Marta, theybelieve that federal regulation of the payday lending is verymisguided (Marta et. Al, 1028). I also agree with the argument of theabove scholars since I feel that much has to be done in paydayregulation lending, and especially in the Texas cities.
Thedesire and push for the legislators to regulate payday lending willnot stop till the idea bears fruits. The research has shown that thefailure for directly regulating the payday is not only affecting theTexas cities, but it has also proven to be a problem in most of thecountries across the world. The government has also failed tosufficiently address the problem of the loans and saving thecustomers from falling in the trap. Regulation of the payday loans bythe government will also help in saving the citizens from beingexploited by the lenders.
Itis now clear that if the Texas’ government would wish to seekgreater consumer protection, then the legislators must go back to theboard to come up with a more effective state-wide regulation of thepayday lending. The regulation should also improve to minimize theharmful effect on the consumers. It is through such strategies thatthe government will help in growing and supporting economicdevelopment through equitable distribution of wealth.
Garemko III, Michael A. "Texas`s New Payday Lending Regulations: Effective
Debiasing Entails More Than The Right Message." Texas Journal On Civil Liberties & Civil Rights 17.2 (2012): 211-249. Academic Search Complete. Web. 19 Nov. 2015.
Seeger, Ted. "Texas Cities Respond To Payday Lending." Houston Law Review
52.2 (2014): 741-771. Academic Search Complete. Web. 19 Nov. 2015.
Skiba, Paige Marta. "Regulation Of Payday Loans: Misguided?." Washington & Lee
Law Review 69.2 (2012): 1023-1049. Academic Search Complete. Web. 19 Nov. 2015.