Payday Loan, regulations and guidelines
The federal government sets forth many regulations and guidelines for the payday lending industry, particularly through the Consumer Financial Protection Bureau. However, states also wield a large amount of power in deciding when and how borrowers can access payday loans. For Texans, several agencies contribute to the regulation of these loans, making it important to familiarize yourself with the relevant rules before taking out a payday loan.
A payday loan in Texas is defined as a short term loan that comes due in full upon receipt of your next paycheck. There are typically higher fees associated with payday loans than other personal loans, but the approval process is less restrictive and funds can often be available the same day.
While payday lenders are regulated by state agencies, local municipalities may also implement additional regulations. The Texas Municipal League provides regular updates of local law changes that affect payday loans as well as car title loans.
State Laws and Regulations
Texas payday loans are regulated by the Office of the Consumer Credit Commissioner (OCCC), which makes sure that lenders stay within the requirements of the law.
- Loan fees: $22 for every $100 borrowed
- Maximum of $1800, all your payday loans combined
- No rollover limits
- No criminal charges for defaulting on your loan: lenders can take you to civil court if you default on your loan, but you may not be brought up on criminal charges (this is not the case in all states)
Texas payday loan maximums are capped at $1,800. The amount refers to the total amount of all loans taken out by a consumer, not each loan. This means that the total of all your payday loans must be under $1,800. The state does not, however, regulate how much interest or fees lenders may charge.
The state of Texas also prohibits a payday loan default from being considered a criminal violation. While the lender can take you to civil court if you default, they can’t take you to criminal court, as they can in other states.
Who qualifies for payday loans in Texas? Anyone over 18 can apply, but payday loans are generally easiest to secure from age 20 and over, and you need a monthly income over $1500. A lower is possible, but chances to qualify are lower. You can also try a personal loan, longer repayment time and loans from $500.
While the state creates a fairly friendly environment for payday lender, they are also subject to local laws as well. There is a growing trend of individual municipalities making additional regulations to protect consumers in their locale. For example, several cities have recently introduced ordinances that limit the number of allowed rollovers to three times or allow payments to be made in four installments.
The blend of Texas state and local regulations makes for a mixed bag of rules throughout the state. Before choosing a lender, make sure they are licensed to do business in Texas and can answer any questions you have about rules within your specific municipality.
Start by calling customer service and asking a few broad questions about Texas payday loan law. If they have trouble answering, you should next contact the OCCC to ensure the company is properly licensed with no outstanding consumer complaints.