I He(art) Justice 2017: Fair Financial Services

Emphasis Area: Fair Financial Services

Problem

Our financial services work emphasizes the need to regulate predatory payday and auto title lending in Texas. Texas borrowers need a market that offers fair and equitable small-dollar loans. Instead, payday and auto title loans in Texas often carry outrageous rates of 500% APR and pull people into a cycle of debt that is hard to escape. State data from the past four years shows a trend of Texas borrowers being hit with higher fees for these loans, and tens of thousands of Texans continue to lose their cars to auto title lenders every year. 

Solution

Texas Appleseed’s work on small-dollar lending is centered around three important areas to achieve meaningful reform – expanding market-based fair loan options, making strides in regulatory reform, and connecting people to resources and opportunities that build financial well-being.

Background Statistics

  • From 2012-2015, payday and auto title lenders drained $5.9 billion in fees from the pockets of struggling Texas families.
  • From 2012-2015, more than 154,000 Texas families lost a car to an auto title lender, many times after paying more in fees than the amount of the loan.
  • In positive news, since June 2011, 40 Texas cities (covering 9.6 million people) have passed the “unified ordinance,” supporting basic fair market practices in the payday and auto title loan marketplace. Texas Appleseed is working at the local and state level for more reform like this.

Personal Story 

Janice is married with five children. The entire family moved from New York to Texas for her husband’s new job, but the job never actualized. In order to pay bills and pay the deposit on an apartment, they took out an auto title loan in 2012 for $1,500. The auto title employee implied that the amount paid would go toward the principal and fees, giving Janice the impression that the business was just like a regular bank. However, she began to notice that her payments only went toward fees, not the principal. In 2013, Janice was late on a payment. Because of this, their minivan was repossessed. After 21 months, they had paid more than $2,100 in fees and still owed the original $1,500 on the loan.

Additional Interest Areas

Dismantling the School-to-Prison Pipeline

Helping Homeless Youth

Criminal Justice Reform

Fair Housing

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