Need a $500 loan to hold out until your next paycheck drops? In Texas, the average consumer will have to repay that amount, plus an additional $645 in interest.

That’s according to a new payday loan analysis from Pew Charitable Trusts that ranks Texas among the most expensive states for consumers to borrow money.

The report is an update of a national analysis of payday loans conducted by the research center eight years ago. Texas state payday lending practices changed little during this time, according to previous findings from Pew.

“We have an extremely expensive payday loan and auto title market,” said Texas Appleseed director Ann Badour. Texas Appleseed is a nonprofit advocacy organization that advocates for equitable policies in Texas.

“People make these payments, and they never progress in paying down the principal,” Badour said. “Or if they do, it’s insignificant progress. And then they get to a point where they just can’t sustain it.”

Sometimes called small dollar loans, payday loans target Americans who live paycheck to paycheck or are in financial difficulty. Critics of high-cost payday loans say the loans can trap low-income Americans in a cycle of debt.

Pew’s updated analysis of payday lending practices in Texas draws on state regulatory data as well as products advertised by the six largest payday lenders in the country. Texas consumers paid $1.5 billion in fees on payday loans in 2021, the analysis found.

The average consumer in Texas who took out a payday loan was expected to pay 527% of the loan amount in fees and interest on a four-month installment plan. The only states with higher average rates were Utah, Nevada and Idaho.

Pew found that payday lenders tend to charge the maximum amount for loans under state law and only charge lower rates when required to do so.

The payday loan industry and critics of regulation argue that they provide vital access to credit where banks choose not to, and that the high fees they charge are appropriate given the track record of credit from their customers.

Over the past decade, states like Colorado, Hawaii, Ohio, and Virginia have passed laws strengthening consumer protections accessing payday loans.

In some of those states, pro-consumer protections enacted by lawmakers mean borrowing from the same payday loan companies can cost the consumer up to four times less, according to Pew.

Washington, DC, and 16 states have already adopted caps on loan rates charged by payday lenders.

Dozens of Texas municipalities have taken action to combat predatory lending practices over the past decade, including Houston and Dallas.

Dallas’ law was the first in the state. Passed in 2011, it required payday loan companies to register with the city, prevented them from paying preload fees and limited the number of times a loan could be refinanced.

In response, payday lenders have introduced new types of loans called unsecured personal loans and signature loans with fees similar to those covered by local regulations.

And in 2019, Texas Attorney General Ken Paxton issued an advisory saying these loans were legally different from loans regulated by local ordinances, such as in Dallas, and that local laws did not apply to them.

In 2021, Dallas further strengthened its laws to include more types of loans and close the loopholes created by the 2019 advisory.

In Dallas, payday loan businesses remain commonplace in communities of color and in areas like South Dallas with lower median incomes. A survey by WFAA-TV (Channel 8) recently counted 88 payday lenders south of Interstate 30.

Local ordinances have been somewhat effective in regulating the industry, but payday lenders have continued to introduce new types of loans to evade the rules, Badour said.

Statewide attempts to create broader regulations have failed. In 2013, legislation that would preempt local ordinances and impose caps on payday lenders failed because state lawmakers could not agree on how to write the regulations.

“It’s true that people need access to credit, and we need to think and be more creative. But a bad product is not the solution,” Badour said.

© 2022 The Dallas Morning News. Distributed by Tribune Content Agency, LLC.