UPDATED: Thursday, January 10, 2013 - 10:35pm
COLLEGE STATION, TX — When an emergency happens and you need access to cash quickly many turn to short term loans as a fix but because of a lack of state regulation, it's easy to fall behind on payments, and before you know it you're trapped in a cycle of debt that's nearly impossible to get out of.
Now the city of College Station is looking to pass a resolution asking the state to take action against these type of companies so they can't take advantage of someone in need.
When you're in a bind and strapped for cash sometimes getting a short term loan seems like a good idea but in most cases you end up owing more than you can afford.
"Somebody could borrow $300 dollars and end up paying back $800 dollars for that amount and that's more than double what you originally borrowed," said College Station community development analyst, David Brower.
Because of a lack of state regulation payday and auto title lenders are able to set their own principals and interest rates.
Some can even be as high as 500 percent APR, making it nearly impossible for people to pay off in full.
This fall the city of Bryan passed a resolution asking the state and Governor Perry to regulate the industry.
Now the city of College Station is following suit.
"Payday lending institutions exist in a loophole," said Brower. "They're actually considered credit counseling businesses so they're not regulated like other lenders are."
Brower says it's important Legislation take action against these companies now before more families find themselves in a financial situation they can't get out of later.
"Less would be paid by our families in fees, which would mean there would be more that they could save and we'd have less families trapped in a cycle of debt."
Cities like Dallas, Austin and San Antonio have already passed similar regulations against these type of lenders.