Senator Eliot Shapleigh - El Paso, Texas

Payday lenders are working hard to bottle up a bill in a Texas House committee that would allow the state to enforce a federal law protecting our military personnel from high-cost payday and auto title loans.

The Department of Defense is asking every state to help enforce this law to ensure that military families are not trapped in a cycle of debt due to excessive charges to borrow small amounts of money.

Congress put a 36 percent interest rate cap on payday, auto title and tax refund anticipation loans to service members after a DoD report said “predatory lending undermines military readiness and harms the morale of troops and their families.”

For example, a single parent in the Air Force took out a $400 loan, renewed it multiple times when she could not repay in full on payday, and owed $3,000 before she asked for help.

San Antonio Rep. Joe Farias and El Paso Sen. Eliot Shapleigh are sponsoring legislation to allow the state’s Office of Consumer Credit Commissioner (OCCC) to enforce the 36 percent federal payday rate cap. Their bill passed the Senate, but payday lobbyists are working hard to prevent a House floor vote.

Why? Based on testimony, it appears that they want to avoid any OCCC authority over their industry — even if it means enforcing a provision protecting military families that has been part of federal law since 2007.

To avoid OCCC oversight, payday and auto title lenders are exploiting a loophole in Texas law that allows them to operate as unlicensed credit services organizations. They contend that the state regulation and consumer protections required of other Texas lenders should not apply to them because they only broker and service these loans.

In reality, payday and auto title lenders make the vast majority of the profit from these loan transactions. They charge high fees for every two- to four-week period that the loan is not paid off in full — which explains why one major payday lending company in Texas recently reported annual revenue in excess of $1 billion.

Texas is home to many military bases. With the economic benefits to our state comes an obligation to stand up for our troops and uphold their rights.

This bill deserves to be heard on the House floor this session. Our state representatives should have an opportunity to join their Senate colleagues in passing Senate Bill 189 — and showing their support for our troops.

Austin attorney Jim George is immediate past chair of Texas Appleseed, a public-interest law center.