Emergency cash is needed for a variety of reasons — cars break down, children get sick or injured, and sometimes jobs are lost.
In 2013, 4,557 people in the College Station-Bryan Metropolitan Statistical Area visited a Credit Access Business (CAB) and used payday and auto title loans to meet their need for emergency funds. They borrowed $6 million and paid $4 million in fees, according to the Texas Office of Consumer Credit Commissioner.
Payday loans are small cash advances with two-week terms — with interest and fees applied. Payday and auto title loans offered by CABs are made by non-affiliated third-party lenders with the CAB acting as a loan broker guaranteeing the loan. Profit is derived from fees charged for their services. In 2013, the average amount Texans borrowed per loan was $463.
Minor emergencies pop up from time to time for everybody, but on this particular evening, it’s happened to you. Your car has a flat tire.
To make matters worse, your last emergency left your bank account dry. You also realize that without a car, you’ll have a hard time getting to work and dropping the kids off at daycare in the morning.
And payday is a week away.
Under this scenario, a payday or auto title loan might be the only option for getting the emergency cash you need. This and similar circumstances create problems for many Texas families because the state does not regulate the terms or conditions of loans from credit access businesses.