What are the Rules that Govern Payday Loans in Texas?

If you are an employee taking pay loans, this is the quickest way to receive money when you needed it most. Beginning the summer of 2019, Payday loans in Texas “Learn More”  are governed by tighter restrictions in order to protect vulnerable borrowers.

New rules passed by the Consumer Financial Protection Bureau gives tougher regulations on auto-title and payday loans. Lending is prohibited without verification of the borrower’s ability to repay it.

The new rules will protect middle and low-income Texans who are trapped with unpaid debts. It is designed to protect individuals who are left paying huge interests when they are unable to repay it on time.

For instance, Mr. Raul Marcial borrowed $1, 500. Since he was unable to repay it on time when he lost his job, his debt ballooned to $4, 000 only after several months.

Earlier, payday loans are unregulated in Texas. However, with the new rules, people like Mr. Marcial can now be protected from incurring high debts.

The new regulation says that lenders cannot go after borrowers when they are aware that they cannot repay them. There are opposing views regarding the new rules. Others believe that it limits people’s access to short-term and emergency loans.

Payday loans are now prohibited in 15 states since people take small loans but repay it with high interest. Oftentimes, they find it difficult to repay because they have to give back the principal amount and the fees on the next payday. The short term makes it more difficult for them to pay it back.

The rules govern that lenders must first verify the client’s information and their capacity to repay it. Assessment must be done before approving the loan.

Lenders cannot just pull out the money from their checking account without any written notice. Moreover, rollover (high fees are passed on to the following month) is not allowed if they fail to pay it in due time.

Earlier, there were few regulations in taking salary loans. Texans used to take short-term, high-fee loans. This is why roughly 8 percent of people in Texas take payday loans compared to the national level that is 5.5 percent on average.

Another payday loan law in Texas reiterates that clients must be fully aware of the risks that come with loans. Lenders must explain thoroughly the interests that would be incurred over time. Borrowers must acknowledge this truth in order for them to avoid getting off-guard. After the new payday loan law in Texas was passed many citizens  ended up taking a pay day loan.

In Texas, there is no specified amount of loan that a borrower can apply for. The average financing fee is 662 percent but it is not fixed. Charges and fees differ depending on the loan amount.

The term varies on the amount of loan. If your loan is $100 or less, the maximum term is one month for each multiple of $10 cash advance of six months. For loans over $100, the term is one month for each multiple of $20 cash advance, according to US States Loans. Org.

No one in Texas who ended up taking a pay day loan can be sued by the lender for their inability to pay their debts. If you go into default, you cannot be charged in a criminal court. However, they can still charge you under the civil court and force you to file bankruptcy.

Further, borrowers are protected from illegal lenders. In case of fraud, it must be resolved by the lender first. If not, you can seek help from the Texas Office of Consumer Credit Commissioner (OCCC).

OCCC regulates lenders that provide small cash loans in Texas. You can also seek help from the Texas Attorney General’s office.

In other states, payday loans are already banned. If you live in Texas, you must understand the rules when taking payday loans to avoid incurring high fees.

Don’t forget that you must pay loans in full during your next payday. Otherwise, additional penalties and fees will be added. In some cases, lenders automatically extend the loan program by adding high fees.

Each lending company has its own set of terms and interest rates. You must check and agree to the binding terms and rates before getting the loan.

Payday salaries are great financial tools during the rainy days. However, you must learn to assess your financial situation before taking one.

Do not take loans to pay another debt. Use it only during emergencies. Remember also not to take multiple loans at once because you will be trapped with debts.

Having loans is hard, especially when it becomes a habit. You must aim for your financial stability first. Keep in mind that payday loans come with responsibility.

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