Wednesday, April 18, 2007

After being scammed by a remodeling contractor several months ago, Yolie Garcia, 30, needed money to help care for her three children and make mortgage payments. Because of her bad credit, she took out a $500 payday loan, expecting to repay $640 dollars in two weeks.

“It’s a convenient easy way for someone like me that doesn’t have good credit to get money,” Garcia said. “You’re in and out within half an hour.”

When she couldn’t afford repayment, she paid $140 every two weeks to renew the loan several times. She eventually took out a second cash advance payday loan just to help pay interest on the first one.

“I cry about it every 14 days when I have to go pay interest,” Garcia said.

Garcia’s situation is not unusual for people who obtain no faxing payday loans. A recent report by the Center For Responsible Lending found that 90 percent of payday lending revenues are based on borrowers who cannot repay their original loan when it’s due, rather than on people using the loans for one-time emergencies.

State Sen. Eliot Shapleigh has proposed a number of bills to deal with the problem.

The state Senate Business and Commerce Committee on Tuesday heard proposals that would close lending loopholes, set up a state database to monitor and analyze payday lending, and limit the maximum rate for interest and fees on payday loans to 36 percent.

“In Texas, predatory lending is a plague. Seven of the 10 highest subprime lending cities are in Texas,” Shapleigh said. “Some of these payday loans have a 1,153 percent interest rate after all the fees are added in.”

Lawyer Scott Sheehan testified that online payday advance lenders are a good business model helping the economy of Texas. Several recent court cases have found that assertions that payday lenders are circumventing the law are not true, he said.

“These are successful businesses; they’re paying taxes and employing people,” Sheehan said.

Some committee members questioned whether lowering the rates that personal loan lenders could charge would put lenders making high-risk loans out of business and deny credit to some people who do not have other alternatives. All Shapleigh’s proposals were left pending by the committee.

Garcia said she still hasn’t paid off her loans and her husband is considering a second job to be able to afford repayments.

“I don’t see how I’m going to get out of it,” Garcia said.

SOURCE: The El Paso Times

This entry was posted on Wednesday, April 18th, 2007 at 2:05 pm and is filed under Texas.