How do Payday Loans Work in Texas? – The Ultimate Legal Guide
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Tex. Fin. Code Ann. §393 here is the weakest link as it lets the payday lenders claim a business license as credit access business so they can serve as intermediator link between the third party lenders and the consumers. Also, there is no limit on the fees that the lenders can charge for lending payday loans Texas.
In addition, the relevant section of the regulations states: “Nothing in [this section] grants authority to the finance commission or the Office of Consumer Credit Commissioner to establish a limit on the fees charged by a credit access business.”
Undoubtedly, online short term loans have incredibly high interest rates and shorter repayment terms making them unfavorable borrowing option for the consumers. Texas lenders can easily trap the borrowers in a debt cycle by charging a series of rollover fees to them. Sadly, Texas payday lending regulations do nothing to prevent credit access businesses from financial abuse of the consumers.
Loan Terms, Debt Limits, and Collection Rules in Texas
Maximum loan amount: N/A
Maximum Interest Rate (APR): N/A, due to the credit access business loophole
Maximum loan term: 180 days
Minimum loan term: 7 days
Number of outstanding loans allowed: Any
Number of rollovers allowed: Any
Cooling-off period: None
Finance charges: Any, due to the credit access business loophole
Criminal action: No, except in case of forgery, fraud, or theft
What is the statute of limitations on a payday loan in Texas?
The statue of limitations law, introduced in 2019, defines the period that a debt collector can initiate a lawsuit to collect the outstanding debts. After the expiration of that period, there is no need of pursuing legal measures because a court can no longer order the borrower to pay the remaining balance. It is four years in Texas.
Rates, Fees, Charge limits in Texas
Although in Texas, there is no state regulation to prevent payday lenders from taking advantage of the credit access business loophole, they are free to charge whatever amount they can convince a consumer to pay. There are no rate limits however there is a rollover clause that prevents borrowers from getting trapped in a endless debt cycle.
Furthermore, any payday loan that consumers must pay back in a single lump sum can have no more than three rollovers, and at least 25% of the proceeds from each rollover must go toward the principal amount of the loan. Any payday loan issued within seven days of a previous loan’s payoff counts as a rollover.
Do You Want to Complain About Payday Lenders?
If any consumer has any complaints regarding online payday loans providers in Texas, then the Texas Office of Consumer Credit Commissioner is the best place to lodge complaints. Here’s the contact information:
Regulator: Texas Office of Consumer Credit Commissioner
Address: Finance Commission Building, 2601 N. Lamar Blvd., Austin, TX 78705
Link to website: https://occc.texas.gov/consumers/file-a-complaint
Consumers can also submit a complaint to the Consumer Financial Protection Bureau (CFPB). The CFPB is a federal organization helping consumers with their financial issues, including any problems with payday lenders.
On a whole, payday loans Texas is a great financial gateway to overcome urgent financial matters, if accessed wisely. So, educate yourself first instead of getting drowned into never ending economic stress.