By: Christina van Waasbergen
The Farabee Senate failed a bill on Friday limiting the interest rates that payday lenders can charge for loans.
Payday loans are a type of short-term money borrowing where a person borrows a small amount of money at a high-interest rate. This can lead to the borrower becoming trapped in a cycle of debt. This bill attempted to solve this problem by mandating a maximum annual interest rate of 50% for unsecured loans (loans not requiring collateral) issued by payday lenders that have a duration of less than thirty-one days.
The bill’s author, Bill Tang, a senior from Glenda Dawson High School, argued that payday loans prey on those with low incomes. “Payday lending services essentially profit off of misery,” Tang said in an interview. “If you were to perhaps go to a city such as Houston, you’ll find that most of these payday lending centers center around poorer districts around the city, and the reason why is because they target these poor individuals.”
Tang also said that payday lenders trap borrowers in debt. “It’s counted on that they won’t be able to pay back their loans, and that they will take out more loans from the company, and it will force them further and further into debt because they take out more money to pay back their old loans,” Tang said.
Anastasia Sotiropoulos, a senior from The Episcopal School of Dallas, spoke against the bill. Sotiropoulos said in an interview that she believes that payday lenders should be able to charge as much interest as they want in order to stay afloat. “That’s just the way that capitalism works,” Sotiropoulos said. “Although it may be unfortunate for people who have to pay a high-interest rate, they are agreeing to it, so as long as the person agrees to it, and it’s like a consensual contract, I think that it should be allowed.”
Sotiropoulos said that there are better ways to fix the problem of predatory payday lending. “If we could make people more financially literate, that would be helpful,” she said.