It’s 2022 and Texas remains among the worst states for consumers to borrow from payday lenders

Need a $500 loan to get by until your next paycheck comes? In Texas, the average consumer will be on the hook to pay that back, plus another $645 in interest.

This is according to a new Pew Charitable Trusts analysis of payday loans, which ranks Texas among the most expensive states for consumers to borrow money.

The report is an update of a nationwide analysis of payday loans conducted by the research center eight years ago. Payday lending practice in the state of Texas has changed little in that time, Pew’s previous findings Show.

“We have an extremely expensive payday and auto title rental market,” said Texas Appleseed director Ann Badour. Texas apple seeds is a nonprofit advocacy group dedicated to promoting just politics in Texas.

“People make those payments, and they never make any progress toward paying back the principal,” Badour said. “Or if it is, it’s trivial progress. And then they get to a point where they just can’t take it anymore.”

Sometimes referred to as small dollar loans, payday loans are aimed at Americans who are living paycheck to paycheck or are in financial need. Critics of expensive payday loans say the loans can lure low-income Americans into a debt cycle.

Pew’s updated analysis of Texas payday lending practices draws on state regulatory data and advertised products from the country’s six largest payday lenders. According to the analysis, consumers in Texas paid $1.5 billion in fees for payday loans in 2021.

The average Texas consumer who took out a payday loan had to pay 527% of the loan amount in fees and interest over a four-month installment plan. The only states with higher average rates were Utah, Nevada, and Idaho.

Pew found that payday lenders tend to charge the maximum amount for loans based on state law and only charge lower interest rates when necessary.

That payday loan industry And critics of the regulation argue that they provide vital access to credit where banks don’t want it, and that the high fees they charge are reasonable given their customers’ credit histories.

Over the past decade, states like Colorado, Hawaii, Ohio, and Virginia have passed laws that strengthen consumer protections when accessing payday loans.

In some of these states, consumer-friendly protections enacted by lawmakers mean that borrowing from the same payday lending companies can cost the consumer up to four times less in fees, according to Pew.

Washington, DC and 16 states have already done so enacted caps on loan interest charged by payday lenders.

Dozens of Texas municipalities have taken action to curb predatory lending practices over the past decade, including Houston and Dallas.

The Dallas law was the first in the state. Enacted in 2011, it required payday loan companies to register with the city, barred them from making upfront fee payments, and limited the number of times a loan could be refinanced.

In response, payday lenders introduced new types of loans called unsecured personal loans and signature loans, with fees similar to those affected by local regulations.

And in 2019, Texas Attorney General Ken Paxton issued a statement saying these loans are legally different than loans regulated by local ordinances like Dallas and local laws don’t apply to them.

2021 Dallas dressed its laws further to accommodate more types of loans and close loopholes created by the 2019 advisory.

In Dallas, payday loan deals remain a common sight in black communities and lower-income areas like South Dallas. A Investigation of WFAA-TV (Channel 8). recently counted 88 payday lenders south of Interstate 30.

Local regulations have been somewhat effective in regulating the industry, but payday lenders have continued to introduce new types of loans to circumvent rules, Badour said.

Federal attempts to create more comprehensive regulations have failed. Legislation in 2013 that would pre-empt local ordinances and set caps on payday lenders failed because state legislatures could not agree on how to write the regulations.

“It’s true that people need access to credit and we need to think and be more creative. But a bad product isn’t the answer,” Badour said.