The information below covers regulations for payday loans in Texas. It’s provided for general information purposes only. This information should not be intended in any way as a legal reference. Texas Payday Lenders cannot give legal advice or recommendations regarding payday or installment loans. Contact the appropriate Texas Government agencies if you have questions about payday advance laws. A good place to start when it comes to specific research would be the Texas Financial Regulation Division. Also, most large cities like Dallas, Houston, and San Antonio have citywide ordinances covering cash advances and payday loans.
Texas Payday Loan Laws and Rules
Texas has gone easy on the payday loan industry over the past few years, but we expect increasing oversight in 2023. Most states have strict regulations governing interest rates, loan length, and extensions. In contrast, Texas has taken a hands-off approach. As it stands now, the maximum time a payday loan can last is six months or one month for each multiple of $20 over $100. Additionally, no payday lender can charge a start-up cost of no more than one-tenth of the amount borrowed. It should be noted that a start-up cost can not be deemed subject to interest charges. Some cities like Dallas and Houston have mandates regulating Texas payday loans and other types of short-term loans.
There were attempts to regulate the Texas payday lending industry a few years back. At that time, the State Legislature attempted to pass laws that would cap interest rates and limit the times a lender could roll over a loan. These regulations didn’t make it very far. With that, many consumer advocates hope these regulations are updated and passed some time in the future, but at this point, it’s tough to tell. Many local cities have new ordinances they’re hoping to roll out soon. Texas has always had a pro-business mindset and it seems that will continue for the time being. For example, a handful of new companies are looking to provide daily Texas payday loans to borrowers.
It may be prudent for Texas to adopt some interest rate cap for online payday loans. With these changes, they can better protect their consumers from a payday loan default or lender lawsuit. We’re already seeing some changes in Dallas as rules are proposed that would cap the number of loans anyone can have at one specific time. No need to eliminate payday or installment loans like some states have already done. These types of short-term loans need in society, but only if issued to the right person under the correct circumstances.
Another thing to consider is that many companies aren’t direct lenders. That doesn’t mean they don’t provide short-term and installment loans. But it’s essential to know the difference between actual payday companies and non-direct lenders.
Online Payday Loan Lending Laws In TX
Our recommendation is to use online loans as a last resort. Many large metropolitan areas like Dallas and Austin have many payday loan options. Dallas alone has dozens of payday loan lenders within the downtown area! You’ll want to explore many options before taking out a payday loan. For example, you can borrow money from a friend, have a garage sale, or try to get a loan from your bank or employer.
As mentioned above, these types of short term loans have high-interest rates. Also, some predatory lenders will attempt to roll over a loan without you knowing. This means that even if you want to pay off a loan in 1-2 weeks, they will only withdraw the finance charge. You’ll be stuck in an endless cycle of paying cash advances and installment loans if you don’t know what’s happening. If you take out a payday advance for a financial emergency intending to pay it back in weeks instead of months, you’ll be fine.
Problems arise when consumers take out a loan for something they want, not something they need. As mentioned above, please consult with your city ordinances if you live in a large city and need more info. For example, if you’re looking for information on actual payday loans. The unsecured financing options discussed on this site are bound to be around in some for the foreseeable future. While we don’t know what type of future regulations will come into play, we do know the rules about online loans in Texas will change. Expect further lending changes as the Texas Legislature has pending bills and amendments. We urge you to check with your state regulators and your specific city to find out the latest changes affecting Texas payday loans.