Payday Loan Industry Spreads Money In Texas


Before Texas became the payday loan capital, it was a home for consumers.

The famous phrase “Gone to Texas” took hold in the 19th century, in part because people were fleeing debt and settling here for a second chance.

The tradition continues with state protections on wages, houses and household goods; most debt collectors cannot touch consumers here.

Texas also has limits on home equity loans which helped prevent the worst of the real estate crash.

In 1999, the state even sued three payday lenders and won $ 1 million for the borrowers.

“Businesses that break the law will not be tolerated, especially those that prey on those most in need of help,” then Attorney General John Cornyn said at the time.

Fast forward to today, and Texas has become payday’s most fertile ground. Over 3,000 breakdown and auto title stores operate here, up from 250 a decade ago, and they take out more than 3 million loans per year.

Many low-income borrowers are trapped in their debt. Most are unable to repay the loans with the next paycheck, so they renew them multiple times. A typical payday loan of $ 300 in Texas generates fees of $ 700, the highest in the country, according to the Pew Charitable Trusts.

Texas has usury laws to protect consumers, and Cornyn cited them at the time. But payday lenders have carved out a place for themselves outside the rules. And Texas doesn’t limit their fees, interest rates, or rollovers, unlike most states.

What happened to this pro-consumer attitude? The industry found loopholes that kept lenders operating, and the legislature never fixed them.

Capitol Treasury

Some cite an ideological shift, with more and more lawmakers rejecting regulation and embracing free markets. Others point to a more traditional explanation: money.

“As payday lenders got big and wealthy, they invested money in campaign contributions and lobbying,” said Cal Jillson, who teaches political science at Southern Methodist University and follows the State. “Texas has a laissez-faire ethic. But the biggest influence is so much money flowing.

In 2013, the troubleshooting industry hired 82 lobbyists for contracts valued up to $ 4.4 million, according to Texans for Public Justice. The industry also gave $ 2.4 million to state political candidates in 2012 and nearly $ 2.5 million to candidates in 2014, according to the group.

“They put a lot of money into the system to stop the reforms, and it worked,” said Craig McDonald, director of the nonprofit research group, which often advocates for policy reform and consumer protection.

In 2013, ACE Cash Express from Irving and EZ Corp. Austin were among the big spenders. They had a dozen lobbyist contracts worth up to $ 745,000, the group said.

Eight former lawmakers were also hired to lobby for the industry, including Keller’s Vicki Truitt, who worked for ACE Cash Express.

Two years ago, former state senator John Carona was frustrated with attempts to pass a reform bill and pointed to industry spending.

“It is a well-known fact that they poured substantial sums all over Capitol Hill,” Carona, a Dallas Republican, said at the time.

He later said the industry had “hired damn near every lobbyist in this town who needed a job.”

“Almost ubiquitous”

Texans for Public Justice hasn’t completed its latest spending analysis, but last year’s contributions have been strong. In 2014, the breakdown industry paid a total of half a million dollars to Governor Greg Abbott and Lieutenant Governor Dan Patrick, the group said.

The industry also contributes to politicians in Washington. Much of the latest push comes from a federal watchdog agency that recently proposed new rules for payday loans. He wants lenders to determine that customers are able to repay without borrowing again. He also wants to cap rollovers significantly.

From 2008 to 2012, salary contributions to Congressional candidates doubled to $ 3.5 million, according to the Center for Responsive Politics’ Dues fell in 2014, but two Texans were among the leaders.

Rep. Jeb Hensarling, R-Dallas, received $ 66,500 and Cornyn, now Senior U.S. Senator from Texas, received $ 27,100 from the industry, according to

Money is not the only card to play. The industry regularly reports strong demand for its products, and opponents concede that short-term loans meet a significant need. The debate revolves around how to regulate costs and reduce harm to consumers.

The industry also praises its contribution to employment and economic development. In written testimony two years ago, spokesman Rob Norcross said payday lenders had 9,200 employees and a payroll of $ 365 million, including benefits. The industry paid nearly $ 14 million in taxes, he wrote, and every legislative constituency has a payday store.

“They are almost ubiquitous,” said McDonald, “and they know how to mobilize politically.”

Follow Mitchell Schnurman on Twitter at @mitchschnurman.


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