The Texas Senate Business and Commerce Committee this week approved new regulations on payday and auto-title loans - a bill that specifies four types of loans companies can offer, limits loan amounts to a percentage of borrowers' monthly income and restricts how often consumers can receive and refinance the loans.
The bill would allow only two types of payday loans and two types of auto-title loans. Loans would be limited to 20% to 30% of a borrower's monthly income. Single-payment payday loans could be refinanced four times, and single-payment auto loans could be refinanced six times.
A second draft of the legislation had eased the restrictions included in an original, drawing complaints from consumer groups, and there was some sentiment that weak regulations were worse than none at all.
Efforts to adopt strict controls in 2011 met with fierce resistance from the proliferating industry, whose proponents say it assists customers who need quick cash but can't qualify for bank loans. But some regulations passed, and current law requires short-term lenders to be licensed and make information clear to customers.
Cities including Dallas and San Antonio have adopted limits on the loan businesses, but they've been challenged in court and new state regulations would take precedence.
The Office of Consumer Credit Commissioner, which regulates the Texas credit industry, estimated that just limiting refinancing could reduce the charges borrowers pay by $132 million to $221 million per year.