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Rep.Johnson, Eric

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REPRESENTATIVE JOHNSON FILES BILL TO CLOSE LOOPHOLE WHICH ALLOWS PREDATORY PAYDAY LOANS  print page

by: Rep. Johnson, Eric
02/16/2011

AUSTIN, TX - State Representative Eric Johnson (Dallas) has filed HB 1323 which will close a loophole in the Texas Finance Code that allows predatory payday and auto title loans that carry interest rates upwards of 500% APR.

"Payday and auto title loans prey upon economically vulnerable Texans, trapping them in a cycle of debt as they struggle to pay the exorbitant interest rates and keep up with their household expenses," said Representative Johnson. "It's time to close this loophole in our lending laws."

In Texas, payday lenders operate as Credit Service Organizations (CSOs) under Chapter 393 of the Finance Code. The CSOs, which were created to help Texans improve bad credit, broker and guarantee short term loans, typically two weeks in duration, at the statutory maximum 10% interest rate, but also charge borrowers fees which average $20 for every $100 borrowed. These so-called "fees" amount to an interest rate on these loans that can exceed 500% APR.

In 2006, Congress passed legislation protecting military families from predatory payday lending by imposing a 36% interest cap on payday and auto title loans. Fifteen states and the District of Columbia have taken action to curb predatory payday lending. The Dallas City Council unanimously passed a resolution urging the Texas Legislature to close the CSO loophole, and Representative Johnson has responded accordingly.

Contact: Brent Rubin
512-463-0586

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P.O. Box 2910

Austin, TX 78768

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Dallas, Texas 75228

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