By Senator Rodney Ellis, Representative Mike Villarreal, Representative Craig Eiland
In an op-ed published in the Galveston Daily News, Adam Burklund, field organizer for the Consumer Service Alliance of Texas, asserted that we and the “consumer interest groups” we represent defeated the predatory lending reform bill last session. While we would like to revel in any claim that gives us so much power over the Texas legislature, we hate to break it to Mr. Burklund, but the only consumer interest groups we represent are the consumers of our respective House and Senate districts.
To refresh Mr. Burklund’s memory, the bill that he says passed “overwhelmingly” out of the Senate Business and Commerce Committee actually passed 5-3, hardly what we would call a landslide. Furthermore, the compromise bill that Mr. Burklund claims Senator Ellis had a hand in killing on the Senate floor last session actually passed off the Senate floor with the support of 24 senators − a truly bipartisan piece of legislation. Maybe Mr. Burklund is referring to the death of the version of the bill that came out of the Senate committee that contained a little provision that the predatory lending industry was really banking on: the so-called preemption clause.
The preemption clause would have voided any steps that cities had taken or will take in the future to protect their residents against the most harmful practices of the predatory lending industry. At the time that the bill was being debated in the Senate, seven Texas cities had passed similar ordinances to protect their residents, all stronger than what was being proposed in the bill that passed out of the Senate committee. Had that version of the bill passed, those ordinances would have been voided and replaced by substantially weaker statewide legislation. Fortunately, the Senate saw the danger of the preemption clause and unanimously, and overwhelmingly, voted to nullify it.
Since then, eight more Texas cities have passed similar ordinances, including the City of Houston. As of today, 6.7 million Texans are protected by an ordinance that is stronger than what passed out of the Senate committee, and this scares the predatory lending industry to death. This is why the industry showed up in droves and testified for hours against the bill when it was heard in the House committee. It was at this point that the bill never saw the light of day again.
Our actions have never been devious, as Mr. Burklund asserts in his op-ed. We have been very up front and honest with our efforts to push for strong legislation that offers real protections for Texas consumers and oppose any legislation that would actually hinder Texas cities from passing ordinances that are right for their residents.
Mr. Burklund claims that we want to kill the predatory lending industry as it exists in Texas. This is also untrue. We want to change how the predatory lending industry conducts business as usual and see the most egregious of its practices die. In 2012, the current predatory lending business model drained $1.25 billion in fees from working Texas families for loans at 500 percent interest and higher. Business as usual hurts Texas families.
The fact of the matter is, while 15 states and D.C. currently either prohibit predatory lending or have regulations restrictive enough that the industry chooses not to operate in those states, there are nine states that have sensible limitations on fee rates, loan usage, and terms, and the predatory lending industry still manages to exist.
We have always maintained that we do not want the small loan business to go out of business in Texas. We understand there is a need for it in our communities. What we want is for the businesses providing the loans to operate in a responsible, fair, and honest way. The people of Texas would be better served if the industry supported fair lending practices rather than fighting efforts to better the way they conduct their predatory business by penning misleading op-eds and attempting to change easily verifiable facts.