Readers of this blog will appreciate that we are not great fans of payday lending operations. As we noted in one recent article, there are aspects of the service that can make it attractive. The borrower of such a loan doesn’t usually have to put up collateral, though some consumers do go so far as to risk losing their vehicles by tying loans to their car titles.
Borrowers also don’t have to worry too much about what their credit score is. These lenders don’t usually care if you’re a good risk or not. In fact, high-risk borrowers are their bread and butter.
The huge interest rates they tend to charge make payback a challenge in the best of circumstances. As a result, these bids for debt relief tend to lead struggling individuals into a vicious cycle in which the debt just gets worse. And the lending company doesn’t care because, whatever likely happens, it stands to make its money back, and then some.
Texas presents a particularly hazardous environment when it comes to payday lending. There are no state laws on the books regulating the industry. Some cities, including San Antonio, have taken steps to pass city ordinances and bring some level of control, but the constitutionality of such laws is in dispute.
Pending resolution of those claims, legislators at the capitol talk about imposing some rules. As was noted recently in the Austin Business Journal, several bills have been introduced modeled on the way things are done in Colorado. Whether they will pass and become law, however, is still up in the air.
In our view, there are better ways to obtain debt relief. The trouble is that many consumers aren’t aware of all their options. To learn what those are, including the protections offered through bankruptcy, it’s best to speak with an attorney with experience in this area of the law.