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In Texas, Toll Collection Outsourced To Payday Lender

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WASHINGTON -- If you want to set up an account to use the new toll road in El Paso, Texas, you may have to first stop by a payday lender.

The El Paso Times reports that the Camino Real Regional Mobility Authority will be working with the payday lender ACE Cash Express to help collect tolls for the César Chávez Border Highway toll road, which is expected to open Jan. 8.

While people who want to set up an account to use the road or pay off their toll charges can do so by phone, mail or online, the only places to do so in person in El Paso are at ACE stores. Those individuals who make the transaction at the payday lender "will be charged a $3 fee to set up the account and a $2 convenience service fee to replenish a non-credit card," the paper notes.

In an email to The Huffington Post, CRRMA Executive Director Raymond Telles said his organization has partnered with the North Texas Tollway Authority, which operates toll roads in the northern part of the state. He stressed that the NTTA is the one with the ACE partnership.

"We asked the NTTA to provide online, mobile app, phone and cash alternatives for El Paso transponder users," he said. "The NTTA has an existing relationship with ACE in [Dallas-Fort Worth], which provides a cash payment option. So, in order for El Paso users to be able to pay cash in person for transponder transactions (as opposed to payments online, by phone or mail), ACE was the only option available to us -- just as it is the only non-NTTA cash location available in DFW. The CRRMA does not have a direct partnership with ACE -- rather, ACE will be providing these services through their relationship with NTTA. We will also continue to look for ways to expand the available cash alternatives for El Paso users."

Fifteen states and the District of Columbia ban payday lending, which the Federal Deposit Insurance Corporation defines as "imposing unfair and abusive loan terms on borrowers." Another nine states restrict payday lending.

Payday loans often prey on society's most economically vulnerable. As the Center for American Progress notes, in Texas, more than 75 percent of payday lenders are in neighborhoods where the median household income is less than $50,000.

What ACE is getting from the partnership is far more valuable than just a small fee.

"What the partnership is essentially doing is potentially sending thousands of potential first customers directly into the stores of a payday lender, giving them what they admit is one of their most important factors," said Diane Standaert, senior legislative counsel at the Center for Responsible Lending.

"Payday lenders essentially don't compete on price," she added. "They all charge simply the highest rates that are permissible under law. But they talk about the location and convenience of a payday loan store in their payday lending business model. There is an increased demand among payday lenders to get that customer in the door for the first time. Because once in, it just becomes a revolving door, and customers get stuck in the unending payday debt trap, which drives the payday lending business model."

Indeed, ACE in El Paso acknowledges the benefit of the partnership to its business.

"We are going to attract customers who have not done business with us," Liz Martinez, a manager of ACE in El Paso, told the El Paso Times, "and that's a good opportunity to offer them a lot of the services that we provide."

Under Gov. Rick Perry (R), Texas has been a welcoming state for payday lenders.

"Texas is still essentially the wild, wild west of payday lending, where you can see payday lenders charging 400 and 500 percent annual interest rates," Standaert said.

The toll partnership with ACE was set up in 2010, during Perry's tenure.

Additionally, the man Perry appointed to oversee Texas' consumer watchdog, William White, is also vice president of payday lender Cash America. The U.S. Consumer Financial Protection Bureau recently fined the company $19 million.

White recently said consumers, not the payday lenders, were responsible for the problems resulting from the loans.

"People make decisions. There's nobody out there that forces anybody to take any kind of loan," he said. "People are responsible for their decisions, just like in my life and in your life. When I make a wrong decision, I pay the consequences."

Cash America's website reports that the interest on its 14-day loans is 533 percent. One of the abuses CFPB went after Cash America for was charging U.S. service members higher interest rates.

Democratic gubernatorial candidate Wendy Davis has called on White to resign.

In 2007, Arizona announced that it was ending its nine-year practice of allowing residents to pay their gas and electric bills at payday loan centers. ACE Cash Express, which is based in Texas, was one of the companies that had pay stations in Arizona for the utility bills. At the time, the company said it didn't believe that gas and electric customers who came into their stores ended up taking out loans.

A handful of cities in Texas are trying to crack down on payday lending. Last year, El Paso adopted an ordinance restricting the practice. Enforcement of the measure, which was supposed to take effect in July, was put on hold, although the city council is expected to take it up again next week.

This post has been updated to add comment from CRRMA.

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