Texas attempts to restrict payday loan businesses in the state

Like most US states, Texas is attempting to restrict payday loan businesses as the powerful chairwoman of the House Pensions, Investments and Financial Services Committee introduces legislation she says would preserve the industry while driving out "bad actors" who prey on consumers.

The three bills unveiled by Rep. Vicki Truitt, R-Keller, differ substantially from legislation by Sen. Wendy Davis, D-Fort Worth, who is calling for a more stringent approach to crack down on payday and car title lenders.

Truitt said Davis' bill would put the lenders "out of business, and that's not going to work." But Davis said Truitt's legislative package "does not go nearly far enough in creating the consumer protections that we need."

Payday lenders arrange short-term loans at fees that critics say often exceed 500 percent a year. Industry leaders say the lenders, operating as credit service organizations, provide an irreplaceable service for those in need of quick financial assistance. But many consumer groups say unethical operators take advantage of vulnerable people and plunge them into a worsening cycle of debt.

Truitt's legislation would impose certain restrictions on lending practices. But it wouldn't cap fees, as Davis' proposal does.

Rob Norcross, spokesman for the Consumer Service Alliance of Texas, which represents lenders, called Truitt's bill a "very positive step in the right direction" but said the industry is still reviewing the legislation before taking a position.

Suzii Paynter, director of the Christian Life Commission for the Baptist General Convention of Texas, expressed concerns about the legislation. "As far as I can see it still allows payday lenders to function," said Paynter, whose organization supports Davis' bill.

Truitt told the Star-Telegram that she is arranging to negotiate with representatives of industry and consumer advocates in an attempt to get past a perennial stalemate that has blocked past compromise efforts.