EL PASO, Texas (KFOX14) — The federal government is imposing tougher standards on payday lenders in the Lone Star State.
The Consumer Financial Protection Bureau has issued a new rule designed to regulate any abusive practices by auto-title and payday lending companies.
It’s schedule to be fully implemented by the summer of 2019.
"I think that it's important that people who need access to a credit line have a fair opportunity to pay it back,” said Luis Bonilla, an El Paso resident.
At this time, we don’t know of any abusive practices in the Borderland.
"Lots of stories about people who've just borrowed money and in reality, the payment plans are impossible for them,” he said.
The new rule requires these types of lenders to make sure the borrower can repay the loan, while maintaining basic living expenses. It also limits refinancing, the number of times a lender can collect from a borrower’s bank account and puts a cooling-off period in place after three consecutive loans.
According to the Texas Fair Lending Alliance, between 2012 and 2016, Texans paid about $7.5 billion in fees alone, while more than 186,000 families lost their vehicles.
"The CFPB's new rule puts a stop to the payday debt traps that have plagued communities across the country," CFPB Director Richard Cordray said. "Too often, borrowers who need quick cash end up trapped in loans they can't afford. The rule's common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail."
In 2014, the city of El Paso put its own regulations in place, setting income restrictions and repayment terms that lenders have to follow for customers.
"Probably the most important thing is to read the fine print,” Bonilla said.
KFOX14 reached out to at least a dozen payday and auto-title loan companies Thursday.
They either declined to speak with us or have not returned our calls.