Payday Loan Companies Cash In as Individuals Struggle with Economy

KENS5.com
August 17, 2010
Fehling, Dave

Houston payday and car title loan outfits are expanding with more stores and flashy advertising just as more and more of their customers are struggling with the economy. The city has more than 500 payday and car title loan stores, many of which see repeat borrowers trapped in cycles of debt. Martha Macris with the Memorial Assistance Ministries said some payday lenders are taking advantage of bad times and charging the equivalent of 800 percent interest. "I think it's unconscionable," she said. According to Texas State Rep. Ana Hernandez (D-Houston), the lenders are using a loophole in Texas state law to charge exorbitant interest rates. She and several other lawmakers would like to impose a 10 percent interest rate cap that is currently imposed upon short-term loans from banks. Still, lenders say their industry is growing because they are providing a much-needed service, citing studies by the Federal Reserve in Georgia and North Carolina that found people bounced more checks and paid more fees to their banks and credit unions when payday lending was banned. Houston does have other options for the working poor in the form of short-term loan programs funded by many charitable groups, but these are much more difficult to find than the lenders that line the streets.
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