Lending bill seen thwarting S.A.

HOUSTON — On the heels of a new campaign finance report demonstrating the political muscle of the payday loan industry in the Texas Legislature, consumer advocates expressed collective dismay that an effort to compromise with the industry has produced a tepid reform bill.

The compromise proposal, sponsored by Sen. John Carona, R-Dallas, drew criticism Tuesday from San Antonio City Council member Diego Bernal because it would pre-empt stronger restrictions in the ordinance adopted by the council last year.

“The spirit of our effort was to create a safety net,” Bernal testified. “I'm not sure that what has been proposed will keep (consumers) out of the cycle of debt.”

Instead, Bernal argued, the proposal would “significantly weaken” the ordinance that went into effect in San Antonio on Jan. 1.

The ordinance limits debt to 20 percent of a borrower's income. The Carona proposal allows loans of up to 40 percent of a person's gross monthly income and more loan extensions than ordinances passed in San Antonio, Dallas, Austin and El Paso.

Carona said the industry should be regulated at the state level because mobile phone applications soon will allow payday lenders to circumvent local ordinances by steering borrowers to store fronts outside municipal jurisdiction.

While Carona acknowledged his legislation disappointed consumer activists, he said he hoped to “strike a balance” in order to win passage and avoid a gubernatorial veto in a Capitol where the payday loan industry has enormous influence.

Deborah Reyes, director of government affairs for payday lender Advance America, defended the compromise.

She noted the bill would for the first time limit loans based on a borrower's income and require lenders to accept partial payments to reduce a loan's principle.

But the compromise reached with industry groups may have cost Carona his House sponsor. Rep. Mike Villarreal, D-San Antonio, said he does not believe “the version presented in the Senate committee today provides adequate protection for consumers.”

He left open the possibility that further negotiations would produce a stronger version.

A coalition of consumer organizations, church groups and charities is seeking reform of an industry they say preys on low-income Texans by locking them into a “cycle of debt” by charging sky-high interest rates and fees to “roll-over” loans that a borrower can't pay off.

Many Texans are “pushed into almost indentured servitude” because they are trapped in an-open-ended contract they cannot escape, testified Rhonda Sepulveda of Catholic Charities of the Archdiocese of Galveston-Houston.

A study issued Monday by Texans for Public Justice found the payday loan industry donated nearly $2.3 million to the campaign treasuries of Texas lawmakers and statewide public officials during the 2012 election cycle.

House Speaker Joe Straus led the pack with $360,000 in donations to his account and his Texas House Leadership Fund.

Lt. Gov. David Dewhurst received $200,000 from the industry while Gov. Rick Perry received more than $100,000, according to the TPJ report.

“Such huge political paydays constrain what if anything will be done to protect the neediest of Texans,” the report concluded.

“This is purely a special interest issue,” Bernal said. “There are no pockets of constituents anywhere who are pro-payday lenders. It is about an industry's ability to buy influence.”


Read more: My San Antonio /  http://www.mysanantonio.com/news/local_news/article/Lending-bill-seen-thwarting-S-A-4368331.php#ixzz2OH3N6AmP