REALITY CHECK: Sen. Ted Cruz’s Defense of Predatory Lenders Charging Texans 492% Interest

RHETORIC: Ted Cruz thinks people who don’t have access to payday loans will end up turning to “‘even worse options.’” 

Yesterday, it was reported that Sen. Ted Cruz (R-TX)defended payday lending as a necessity during a San Antonio campaign stop. At the event, featuring members of “San Antonio’s black community,” Cruz said of efforts to cap payday loan interest rates, “‘You don’t want to remove credit options for people in a tough circumstance where they have to then go to a loan shark.’” He later added, “If you come in and ban payday loans, it’s not like the people who are getting payday loans now suddenly are not going to need money for the rent,’” and also claimed that “‘If they don’t have payday loans, they are going to find even worse options.’” [Jeremy Wallace, “Ted Cruz defends payday lending during San Antonio stop,” Houston Chronicle,08/07/18]

REALITY: Many payday borrowers already end up using other options to pay off their loans.

The Pew Charitable Trusts found that borrowers “turn to the same options they could have used instead of payday loans to finally pay off the loans.” “Some borrowers ultimately turn to the same options they could have used instead of payday loans to finally pay off the loans. Forty-one percent need an outside cash infusion to eliminate payday loan debt– including getting help from friends or family, selling or pawning personal possessions, taking out another type of loan, or using a tax refund.” [“Pew Survey: Payday Loans Fail to Work As Advertised,” The Pew Charitable Trusts, 02/01/13]

REALITY: The majority of payday borrowers feel taken advantage of and want more industry regulation.

The Pew Charitable Trusts found that 55% of all payday borrowers feel that payday loans take advantage of borrowers and 72% of all payday borrowers favor more regulation of the payday industry.[“Payday Lending in America: How Borrowers Choose and Repay Payday Loans,” Pew Charitable Trusts, February 2013]

REALITY: Over the course of his career, Sen. Ted Cruz has taken at least $13,860 from the payday lending industry.[“Payday Lenders – Money to Congress,” Center for Responsive Politics, accessed 08/08/18]

REALITY: In 2016, Texas payday loan and auto title stores issued nearly $1.5 billion in new loans. The 2,143 stores recouped almost $1.6 billion in fees during the same year. [“Payday and Auto Title Lending In Texas,”Texas Appleseed, 2016]

REALITY: The average payday loan in Texas has an APR of 492%. Single payment payday loans issued in Texas in 2016 averaged $23.76 in fees per $100 in loan value. [“Payday and Auto Title Lending In Texas,”Texas Appleseed, 2016]

REALITY: Payday lenders and their allies in the state legislature have fought to keep Texas “‘the Wild West’ of predatory lending” by fighting the CFPB’s Payday Lending rule so they can charge more than 600% APR on their loans. In fact, a Texas payday lending trade group, the Consumer Service Alliance of Texas, sued the CFPB in 2018 “to block new rules… that advocates say would protect borrowers across the country from predatory lending practices.”[Michael Barajas, “Payday Lenders Are Working Hard to Keep Texas the ‘Wild West’ in Trump Era,” Texas Observer, 04/17/18]

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