Texas Senate Bill SB1906

Texas 2025 - 89th Regular

• Filed: 3/5/25

Caption

Relating to increasing the interest rate of certain consumer loans.

Impact

The implications of SB1906 are significant as they would alter the legal landscape governing consumer loans in Texas. By increasing the allowable interest rates, the bill could potentially lead to higher costs for consumers who rely on these types of loans, particularly lower-income individuals who may have limited access to credit. Proponents of the bill may argue that such changes could support lenders by enabling them to expand services, while critics warn that this could foster predatory lending practices that could trap consumers in cycles of debt.

Summary

Senate Bill 1906 proposes to amend existing Texas finance laws related to interest rates on certain consumer loans. The primary objective of SB1906 is to increase the maximum allowable interest rates that lenders can charge on unsecured loans. Specifically, the bill suggests that interest rates could rise to as high as 36 percent per year for cash advances below a specified threshold, which is an increase from the current cap of 30 percent. The new rates would apply to loans made after the effective date of the bill, which is set for September 1, 2025.

Contention

The proposed changes in interest rates have sparked a variety of opinions among lawmakers, consumer advocacy groups, and financial institutions. Supporters of the bill claim that it would stimulate economic growth by making more capital available to consumers and businesses. Conversely, opponents express concerns over the potential for the bill to facilitate predatory lending practices, arguing that increased rates could disproportionately affect vulnerable populations, leading to greater financial instability and hardship.

Texas Constitutional Statutes Affected

Finance Code

• Chapter 342. Consumer Loans
  • Section: New Section