Texas Senate Bill SB1285

Texas 2009 - 81st Regular

Caption

Relating to the interest and fees that may be charged for certain consumer loans; providing a criminal penalty.

Impact

The implications of SB1285 on state laws are significant, particularly for the finance sector. By establishing a maximum interest rate and enforcing the requirement for a refund of unearned interest charges upon full loan prepayment, the bill seeks to create a more favorable and transparent environment for borrowers. This legislation aims to mitigate predatory lending practices that can harm vulnerable consumers, promoting greater financial stability in the community. Furthermore, the inclusion of a criminal penalty for violations of these regulations adds an enforcement mechanism intended to deter unethical lending behaviors.

Summary

Senate Bill 1285 addresses the regulation of interest and fees that may be charged for certain consumer loans within the state of Texas. The bill proposes a cap on interest rates for cash advance loans that are not secured by real property, specifying that such loans cannot exceed an interest charge of 36 percent per annum, inclusive of any applicable fees. This change is intended to protect consumers from excessively high charges associated with short-term loans, which often lead to cycles of debt that are difficult to escape.

Contention

While the bill appears to promote consumer protection, it may face opposition from parts of the financial industry concerned about constraints on lending practices. Critics may argue that stringent limitations on interest rates could reduce lenders' willingness to offer loans to high-risk borrowers, which could potentially limit access to credit. Therefore, the debate surrounding SB1285 may highlight a fundamental conflict between the need to protect consumers and the necessity of maintaining the availability of financial services.