State Sen: payday lenders out of gvt. business

by Marty Schladen, USA Today Network—

AUSTIN – Texas Sen. Jose Rodriguez wants the state and local governments to stop doing business with payday and auto-title lenders.

The El Paso Democrat has filed Senate Bill 836, which would prohibit state agencies, counties and municipal governments from contracting with the businesses, which have been accused of exploiting poor Texans with interest rates often in excess of 500 percent per year. The bill also would prohibit businesses who contract with governmental agencies from using the lenders as subcontractors.

Rodriguez filed the bill in response to reports by the El Paso Times last year that people could go to ACE Cash Express to make payments under the controversial Driver Responsibility Program. Rodriguez is a longtime critic of the payday-lending industry in Texas, which has some of the loosest regulations in the United States.

In addition to the Driver Responsibility Program, ACE also collects for the North Texas Tollway Authority, which operates toll roads in the Dallas-Fort Worth Metroplex.

An online brochure for ACE says it charges 661 percent annual interest on a 14-day, single-payment loan. Critics of the industry say many customers become trapped into repeatedly renewing such loans.

“The state shouldn’t be forcing poor citizens into the hands of predatory lenders,” Rodriguez said in an email. “These lenders want nothing more than to identify new customers to trap in an unending cycle of debt. Government has no business feeding these lenders new clients.”

ACE is not collecting state payments in an attempt to grow its loan business, said Rob Norcross, spokesman for the Consumer Service Alliance of Texas, an industry group that represents payday lenders. He referred to a 2007 study ACE did that determined that 1 percent of people who paid utility bills at ACE stores took out loans the same day.

“This is not a big cross-marketing thing,” Norcross said.

Along with payday loans, the Driver Responsibility Program also has been accused of victimizing the poor. The 2003 law imposes administrative fines on motorists convicted of traffic offenses such as drunken driving, no insurance, driving without a license or accumulating too many points against a license.

The fines are usually stretched over a three-year period, and failure to pay them results in license suspension and another fine if the motorist is stopped by police.

In testimony, lawyers have told Texas legislative committees about clients who have gotten caught in the program, racking up more than $20,000 in fees and making multiple trips to jail for driving with licenses that were suspended for not paying those fees.

The company that contracts with the state to collect for the Driver Responsibility Program, Austin-based Municipal Services Bureau, uses ACE as a subcontractor. In 2015, ACE gathered about $3 million of the $152 million collected by Municipal Services Bureau for the Driver Responsibility Program.

Rodriguez said it’s important that a prohibition on contracting with payday lenders include government subcontractors.

“There are ample other businesses they could contract with, including large grocery store chains that Texans already frequent,” Rodriguez said. “Predatory lenders should be completely out of government fees collection business. There should be no loopholes.”

Marty Schladen can be reached at 512-479-6606; mschladen@gannett.com; @martyschladen on Twitter.

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