You've probably seen the signs and stores for short term loans that can bring you quick cash in an emergency.
But the costs and incredibly high interest rates can really add up if you fall behind on payments.
The cities of College Station and Bryan are asking the state to pass new regulations for the industry to keep people from being trapped in a cycle of debt.
Short term loans can fill a need.
It's quick cash for people to pay for emergencies and bills.
Alison Prince helps with low to moderate income families in B/CS working at the United Way of the Brazos Valley.
They are pushing for more loan regulations.
"When an individual takes out a loan they have to make a payment on it within two weeks. But if they cannot pay the entire principal back they have to extend the loan and roll over the loan," said Prince the Vice President of Community Impact for United Way.
In 2011 the State Legislature required loan companies to begin reporting figures for the first time. Prince says between January and June residents in the area paid $1.3 million in loan fees and 101 vehicles were repossessed.
Interest rates can soar as high as 500 percent APR.
"The resolution is the city council sending a message to the state legislature and to the governor asking them to pass legislation to regulate this industry," said David Brower, a College Station Community Development Analyst.
Information from the Consumer Service Alliance of Texas shows most short term loans average between $50 and $1750 dollars with $15 to $22 in fees for every hundred borrowed.
The Alliance represents 2400 loan stores.
"CSAT members believe that rate caps or attempts to fix prices and artificially distort competition in the marketplace limits access to credit for Texas consumers," said Julie Hillrichs, a spokesperson for the Consumer Service Alliance of Texas.
"Our concern is not necessarily that people are utilizing them, it's that they get trapped into the cycle of debt," said Alison Prince.
In lean times like this it's an industry that more and more people seem to be turning to, which is forcing more cities to push for regulations.
The cities of Dallas, Austin and San Antonio have already implemented similar regulations against these short term loan stores.
The College Station City Council looks at the issue Thursday at 7 P.M.
The City of Bryan passed a similar resolution in August.
*Statement of the Consumer Service Alliance of Texas (CSAT)*
"In 2011, Texas lawmakers gave the Texas Finance Commission and the Office of the Consumer Credit Commissioner (OCCC) comprehensive licensing, examination, and enforcement authority over Credit Access Businesses (CABs) and payday loans. Important new consumer protections related to transparency, disclosures and contractual requirements were also imposed. The payday legislation was comprehensive and significant.
"Although the Consumer Service Alliance of Texas (CSAT) supported additional changes in 2011 to address cycle of debt concerns, these proposals failed on procedural grounds late in the legislative session.
"As a result, the industry has voluntarily expanded its existing Best Practices to include no cost extended payment plans, transaction limits and mandatory fee reductions. The expanded Best Practices put every consumer – regardless of the type of loan obtained – on a path to full repayment in a time certain, or in a no cost extended payment plan that will fully repay their debt. These changes were adopted in April and implemented last month by every CSAT member company.
"House Speaker Joe Straus, R-San Antonio, and state Sen. John Carona, R-Dallas, have indicated that lawmakers will act to address cycle of debt issues in the 2013 legislative session beginning in January. CSAT members wholeheartedly support those efforts, but will continue to resist ill-advised efforts to fix prices and artificially distort competition in the marketplace, thus limiting choices for Texas consumers."
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The Consumer Service Alliance of Texas (CSAT) is a trade association that advocates the protection of financial choice based on informed decision-making and personal responsibility for Texas consumers. CSAT represents the interests of consumers and Credit Service Organizations (CSOs) across Texas. For more information, visit CSAT’s Web site at www.consumerserviceallianceoftexas.org.
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