How Texas Compares To Other States For Lending Regulations

Payday loans have been a controversial issue ever since they were created. They are also one of the growing industries in the United States due to the state of the economy and people’s need for money. The problem with payday loans is that often, the high interest rates associated with the loans cause more harm for the borrower than help. The regulation of payday loans usually tends to be handled state by state with no real federal regulations in place. There are some states that have prohibited payday loans, however even if they are payday loans are prohibited some lenders operate their business illegally. The states that do not have regulations on the payday loan market are the following.

New Hampshire
New York
New Jersey
New Mexico
South Dakota

In these states, lenders are generally able to charge any price that they find appropriate that the borrower agrees to pay. This means that if a person borrows one hundred dollars and agrees to pay a 60% interest rate. There is no system in place to prevent them from being taken advantage of.

One of the primary arguments against payday loan services is that they exploit people with low-income. That is where the main problem with payday loans occurs. People who need to borrow money for short term expenses will use a payday loan service, and then get stuck in an awful cycle of debt. Lenders and other supporters of payday loans say that pay day loans are lawful because nobody is forcing someone to apply for a payday loan. This is not true for a variety of reasons.

The reason that payday loan services can completely crush a small income community is because they often tend to be the only money lending service available to them. The supporters of payday loans will often say something along the lines of, well why don’t they just apply for a loan from a bank? The problem is, they often can’t. People in low-income communities frequently have bad credit, which makes being qualified for a bank loan very difficult. The other argument supporters of payday loans often have is that, if you don’t want to be charged high interest rates, then just don’t get a payday loan. The issue with that statement is that normally, most people wouldn’t apply for a payday loan. However, there are circumstances that force them to try and find money through any means available. Things come up in everyday life such as car repair needs, sudden medical bills, and other surprise costs that they could not have foreseen.

The other problem with payday loans is that they frequently target people with addictions or other medical health problems. These people will use payday loans to feed their habits. Not only does this hurt them by enabling bad behavior, even if in the future they try to get drug free they still can wind up with thousands of dollars in debts. Payday loans are a malicious market. The states that were listed previously do not have regulations for payday loans. That means that extremely high interest rates can be applied to any borrower if they agree to it.

About Kyle

Kyle has been covering the online lending and consumer finance markets since 2006, he works every day to find topics that help consumers save money daily and avoid debt. You can connect with him on Twitter, LinkedIN and Google+

Comments are closed.

  • is powered by a passionate group of finance writers. The main author for this section is Kyle who works on a variety of consumer finance websites helping consumers learn about financial options, reducing debts, setting up budgets and navigating the world of consumer finances.
    Last updated November 13, 2015 - If you are searching for short term loan offers in Texas and need helping determine what type of loan makes the most financial sense, we hope you will find our articles and news sections helpful. We also welcome suggestions and topics for covering for consumer finances. Texas direct lenders offers loan options for almost every credit scenario and market in the State, if you have questions about your specific goals, feel free to post on our blog and our finance team will work to address these for you quickly.
  • Searching for additional information regarding loans and regulations for Texas borrowers, contact:

    Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, TX 78705-4207, (800) 538-1579,,

  • ^ Available where permitted

    ** As of August 19, 2015. Ratings on third-party websites may periodically change, please check the third-party websites for up-to-date reviews and ratings. Texas Loans Lender Rating: 4.84 out of 5 based on 86 reviews.

  • RSS Financial, Stocks and Business News Stories