Several Texas cities have taken action to curb high-cost lending in the state; but many big lenders are finding ways around the laws, such as giving away cash for free in exchange for title to the borrower's car.
In Dallas, San Antonio, and Austin, the loans have 0 percent interest but are due in full after 30 days. If the borrower cannot pay, he or she is directed to another location outside of the city to receive a new, unrestricted loan that could have an annual rate as high as 310 percent. The borrower is also able to roll over the loan repeatedly at that location. According to a study by the Consumer Federation of America and Center for Responsible Lending, the average title borrower renews a loan eight times. Those who default risk having their cars seized.
In Texas, at least eight towns and cities have passed lending ordinances in recent years; but it also has been a time of booming growth for TitleMax’s parent company, the title lender TMX Finance, which has more than 1,200 stores across 14 states. In Texas, TMX has opened more than 150 stores in the past two years. Late last year, Texas’ regulator for payday lenders voiced concerns about the practice of offering a 0 percent loan to customers in those cities, saying it was possibly deceptive. State regulators, however, do not have authority to enforce city ordinances.