State Must Do More to Encourage Lower-Cost Options to Payday, Auto Title Loans 

A new report released by Texas Appleseed—Reshaping the Future of Small-Dollar Lending—urges the State to enforce basic standards for affordable credit and to encourage lower-cost loan options in a market now dominated by high-cost payday and auto title lenders.

New state licensing and disclosure requirements for payday and auto title lenders took effect January 1st, but these lenders still charge in excess of 500% APR and recurring fees which are above those prescribed in  Texas consumer lending laws. 

The report profiles small-dollar loan products -- currently offered by financial institutions, consumer finance companies, and non-profits -- that include these desirable features: 1) affordable pricing, 2) loan amounts linked to an assessment of the borrower’s capacity to repay on time, 3) a repayment period longer than the two to four weeks typical for a payday or auto title loan, 4) the ability to build credit or savings, and 5) access to financial education or credit counseling.

Representatives from the Federal Reserve Bank of Dallas, the FDIC, Citi Community Development, and RAISE Texas served as advisors on this report—and recently joined Texas Appleseed in convening financial institutions,  private sector lenders and nonprofits to discuss how to make small loans more affordable to borrowers with poor access to credit.

PRESS RELEASE