HOUSTON -- Payday and car title loan stores in Houston are opening new outlets, installing massive, eye-catching video screens, and by some accounts, seem to be finding more customers as the struggling economy squeezes household budgets to the breaking point.
"They're all over Houston, they’re everywhere," said one customer who came out of a car title loan store on Uvalde Road on Houston’s far east side. “They’re making a killing."
Houston has more than 500 payday and car title loan stores. On the west side along Long Point Road, some are shiny and new. One called Speedy Cash has a giant video screen featuring a dancing critter with paws full of cash . There are still more on the east side along Uvalde Road and Woodforest Blvd.
"It helped me a lot,” said a customer who got a loan using his car title as collateral.
Another man who was leaving a pawn shop disagreed.
"I just wouldn't use them. I don't like paying more money than I need to," he said.
That seemed to be the experience of a middle-aged woman who was leaving a payday lender on Uvalde.
“I came for a $200 loan and it's been two years," she said.
She said she intended to pay the loan off as soon as she got her next paycheck, but didn’t. Instead, she said she kept coming back for more, each time paying a fee for a whole new loan over and over.
"It's like, ‘Oh my God, how are you ever going to get this thing paid off?’" she said.
Martha Macris with the Memorial Assistance Ministries said that’s how people get stuck.
“They get a $200 loan, payday comes, they can't pay the full they, they have to roll it over," she said. The west-side organization is located just a block from where some of the payday lenders are located on Long Point . Macris said the financial assistance it provides to the working poor is up 50 percent this year.
"Jobs are tight," said Macris.
That’s one reason she believes payday lenders are doing more business, and, she said, are taking advantage of bad times.
Macris said they've seen payday loan customers charged the equivalent of 800-percent interest.
"I think it's unconscionable," she said.
"They're using a loophole in the Texas law," said Texas State Rep. Ana Hernandez, a Democrat representing Houston’s east side.
She and some other Texas lawmakers want to slap payday lenders with the same 10-percent interest rate limit imposed on the short term loans banks make.
"We don't want to put them out of business, we just don't think it's fair they're preying on this vulnerable population," said Hernandez.
But if payday lenders are so bad, why do so many of them seem to be doing so much business? The lenders say it’s because they provide a needed and valuable service for people who are short on cash."
"I think this industry has been growing because they do satisfy a consumer need,” said Scott Sheehan, a lawyer with the Consumer Service Alliance of Texas, a group representing payday lenders.
Sheehan said Houstonians are better off with them than without them despite what they admit can be expensive fees.
“And yes, the percentage can be over 500," Sheehan said of the equivalent interest rate. But he said look what happened in states that banned payday lenders: a study by the Federal Reserve found that in Georgia and North Carolina, people simply bounced more checks, paying "millions" in returned check fees to their banks and credit unions, fees that the study found were even more costly than had the customers used payday loans. See the report at: http://www.newyorkfed.org/research/staff_reports/sr309.pdf
There is another option: many charitable groups have short-term loan programs for the working poor. But those programs are a lot harder to find than the lenders that line some of Houston's busiest streets.
Here are some places to get help:
Memorial Assistance Ministries
http://www.maministries.org/needhelp.html
Northwest Assistance Ministries
http://www.namonline.org/site/c.ktJYJ7MNIuE/b.2035655/k.2387/Assistance.htm
