Increased scrutiny of payday lenders, often called predatory lending because of how much interest is charged over small amount loans, has led state and federal authorities to place more regulations on the industry. But some payday lenders in Texas have found a way around those laws.
Jon Prior, staff writer for the Dallas Business Journal, says the state put a 36 percent cap on the interest rate that payday lenders can charge for a first loan. But some payday businesses are registering as “credit repair businesses” to skirt those rules.
“Payday lenders are using local ordinances to register as credit repair businesses so they don’t have to follow the already permissive state laws and upcoming federal laws,” he says. “Some cities have cracked down on this to try to close the loophole but obviously, you can see how they’re getting around it still.”
What you’ll hear in this segment:
– What happens when cities do crack down on this kind of registration of payday lenders
– Who characterizes whether a business is, in fact, a payday lender or a small-loan business for people with bad credit
– How state law could close this loophole and whether the federal consumer protection agencies will step into the fight