Payday & Auto Title
Loans in Texas
A study by the
League of Women Voters of Texas
Education Fund
2014 - 2016
Elizabeth Erkel, Study Chair
Focus: To explore the…
• Accessibility
and impact of
payday and auto
title loans
&
• Current
regulations on
payday and auto
title lenders
in Texas
The League of Women Voters of Texas Education Fund
2
What are payday & auto
title loans?
• A small, short-term cash advance
• Obtained within an hour from a
• Storefront or
• Internet site
• Bank account or vehicle title
pledged for payment
3
What are the loans used for?
Unexpected expenses 16%*
Something special 8%**
Other 5%
Unknown 2%
Basic living expenses, e.g., utilities, car
payment, prescription drugs, school
books & supplies
*E.g., medical emergency, car or house repair.
**E.g., vacation, entertainment, gifts.
The Pew Charitable Trusts, Payday Lending in America: Who Borrows, Where They Borrow, and Why, 2012, p. 14.
Why use a payday or auto
title loan?
References available upon request.
5
Who are the
lenders?
• Most are
independent,
solo stores
• Average 3
employees
Offer small loans to those with an inadequate
credit score or blemished credit report.
References available upon request.
6
Who wants change?
• Texas Fair Lending
Alliance
• Texas Municipal
League
• Faith Leaders for
Fair Lending
• Texas IMPACT
• Center for
Responsible Lending
• The Pew Charitable
Trusts
References available upon request.
7
Accessibility in Texas
Texas Appleseed, 2014
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Percent Households Using Payday & Auto Title Loans,
by Recency of Use & Geographic Area, 2013
Payday Loans
Auto Title Loans
7
7
5.9
4.6
5
4
2.7
3
2
2.0
6
% Households
% Households
6
4
0
0
United States
Texas
1.7
2
1
Ever
2.7
3
1
Last 12 Months
4.6
5
0.9
Last 12 Months
United States
Federal Deposit Insurance Corporation, Custom Data Table Tool, 2013
Ever
Texas
Cost of a $500 Short-Term Loan, by Type,
Maximum Charge, and State, 2015
State
Maximum Charge
Cost ($)
APR
Single Payment, 2-Week Payday Loan
Minnesota
Oklahoma
N. Dakota
Texas
33% APR + $25
<$301 = $15/$100 +
$301-$500 = $10/$100
20% of principal + $0.50
10% APR + any fee
33.10
65.00
172%
338%
100.50
126.92
523%
660%
12.50
75.00
125.00
137.36
30%
180%
300%
310%
Single Payment, 30-Day Auto Title Loan
Florida
Arizona
Alabama
Texas
30% APR
15%/month
25%/month
10% APR + any fee
Sources listed in Facts & Issues References.
10
Estimated Biweekly Household Income & Expenditures
for a Single-Parent/One-Child Family, Dallas-Fort
Worth-Arlington Metropolitan Area, 2014
2,000
$1,961
Payday Loan*
1,500
Dollars
Expenditures
Other
$1,334
Medical
$1,060*
Transportation
1,000
Child Care
Food
500
Rent
Taxes
0
Income
Expenditures
*Based on average hourly pay ($13.24) for sales and related occupations in the Dallas-Fort
Worth-Arlington Metropolitan Area in 2014 (Better Texas Family Budgets, n.d.).
Texas Law
• Interest*
– 10% APR
• Consumer Loan fee
limits**
– 2-wk APR/$500: 310%
– 1-mo APR/$500: 170%
• Credit Services
Organizations***
– Fee “as agreed upon
between parties”
– Disclosure required
• Posting
• Disclosure in
writing to consumer
*4 TEX. FIN. CODE § 342.004
**5 TEX. FIN. CODE § 393.601-602
***4 TEX. FIN. CODE § 342.251-259
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Cost ($) of a $500 Single Payment, Payday & Auto Title Loan,
by Type Loan, Type Charge, & Texas Statute, 2015
Credit Services
Organizations *
Type of Charge
Consumer
Loans **
Single Payment, 2-Week Payday Loan
Principal
Acquisition fee
Lender interest (10% APR)
Total charges
500.00
125.00
1.92
126.92
500.00
59.35
1.92
61.27
APR
660%
319%
Single Payment, 30-Day Auto Title Loan
Principal
Acquisition fee
Lender interest (10% APR)
Total charges
APR
533.00 ***
133.25
4.38
137.63
310%
533.00 ***
69.95
4.38
74.33
167%
*5 TEX. FIN. CODE § 393.601-602. **4 TEX. FIN. CODE § 342.251-259. ***Includes $33 title lien fee.
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City Regulation
• Business ordinances
– 21 cities
• Land use ordinances
– 11 cites
• Both
– 3 cities
• 8 legal challenges
– All dismissed
Texas Municipal League, May 2015
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Q: Do payday & auto title loans ultimately
help or harm consumers?
A: The jury is still out!
References available upon request.
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How can the payday and auto title
loan market be regulated so it:
• Is financially viable
• Maintains access to credit
• Safeguards consumers
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www.LWVTexas.org
LWVTexas@LWVTexas.org
512-472-1100
League of Women Voters of Texas Education Fund
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