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When facing a financial shortfall, many Texans ask a critical question: how many payday loans can you have in Texas? The answer is not a simple number. Texas state law does not impose a specific limit on the quantity of loans a person can hold simultaneously.
Instead, the real restrictions are found in a patchwork of powerful city ordinances. These local rules primarily base borrowing limits on a person's income, not a loan count. This framework means that for a significant portion of the state's population, your borrowing capacity is defined by what you can afford—a rule designed to prevent the cycle of debt.
Understanding this distinction between permissive state laws and protective local regulations is the first step for anyone considering traditional or online loans texas.
There is no statewide law in Texas that dictates a maximum number of payday loans a person can have at one time. In areas of the state not covered by a local ordinance, it is legally possible for a borrower to accumulate multiple loans from different lenders, a situation that can lead to severe financial distress. One documented case involved a borrower from Richardson who found herself juggling seven separate payday loans, with a total liability exceeding $1,229.
However, this lack of a statewide numerical cap is not the full story for millions of Texans. The practical, effective limits on payday borrowing are established at the municipal level. Over 45 Texas cities, including all major metropolitan hubs like Houston, Dallas, San Antonio, and Austin, have enacted what is known as a "unified ordinance".
How City Ordinances Limit Loans
These local laws create a ceiling on borrowing by limiting the size of a loan relative to the borrower's income. The most important rule under these city ordinances is that a single payday loan cannot exceed 20% of the borrower's gross monthly income.
This income-based restriction functions as a powerful de facto limit on the number of loans. If a borrower takes out a loan that reaches this 20% cap, a compliant lender operating within that city cannot legally issue them another payday loan. Therefore, for residents of these cities, the answer to "how many" is often "one" if that single loan utilizes their full borrowing capacity.
To grasp why city-level rules have become so crucial, it is essential to understand the unique legal environment governing payday lending in Texas. The industry has adapted to and exploited a legal loophole, effectively bypassing traditional consumer protections.
Bypassing Texas Usury Laws
At its foundation, the Texas Constitution provides strong usury protections, stating that contracts with an interest rate higher than 10% per year are illegal. However, payday and auto-title lenders in Texas operate with annual percentage rates (APRs) that frequently exceed 500%, a figure that seems to violate this principle.
How the Credit Services Organization (CSO) Model Works
The mechanism that makes this possible is known as the "CSO loophole." Instead of operating as licensed consumer lenders, these businesses register under the Credit Services Organizations (CSO) Act. This law was originally intended for firms that help consumers repair their credit, not for lenders themselves.
By registering as a CSO, a payday lender can then obtain a license to operate as a Credit Access Business (CAB). The CAB acts as a broker, arranging a loan for the consumer from an independent, third-party lender. This third-party lender issues the loan at a compliant interest rate (10% or less).
Unregulated Fees and High APRs
The CAB then charges the consumer enormous, unregulated fees for its "services" in arranging and guaranteeing the loan. These fees, which can be $22 to $25 for every $100 borrowed, constitute the vast majority of the loan's cost. The combination of the lender's small interest charge and the CAB's massive fees results in the sky-high APRs that define the industry.
The state's primary regulator, the Office of Consumer Credit Commissioner (OCCC), licenses CABs but has limited power to control the cost of these loans because the CSO Act does not cap fees. This regulatory vacuum compelled Texas cities to create their own consumer protections.
The unified ordinances adopted by Houston, Dallas, and dozens of other Texas municipalities represent the most significant consumer protections available to payday loan borrowers in the state. These local laws establish clear standards for affordability and mandate a structured path to repayment.
The 20% Gross Monthly Income Cap
The cornerstone of the city ordinances is the affordability test. A CAB is prohibited from arranging a payday loan for an amount that exceeds 20% of the consumer's gross monthly income. Lenders must verify a borrower's income using a paycheck stub or other official documentation before issuing the loan.
Restrictions on Loan Renewals (Rollovers)
A "rollover" is when a borrower pays a fee to extend a loan without reducing the original principal, a practice that can trap borrowers in debt. City ordinances attack this debt trap directly.
Rules for Installment Loans
The city ordinances place even stricter limits on installment-based payday loans.
The Principal Reduction Mandate
Perhaps the most powerful anti-debt-trap measure is the principal reduction requirement. For every renewal or installment payment, the payment must be used to reduce the original principal amount of the loan by at least 25%. This rule makes "interest-only" style payments illegal and ensures every payment makes substantial progress toward paying off the debt.
The unified ordinance model has created a consistent set of rules covering over 11 million Texans in more than 45 cities. This movement, supported by organizations like the Texas Municipal League, reflects a strategic response to state-level inaction.
Payday Loan Limits in Houston
Houston's ordinance took effect on July 1, 2014. Lenders in Houston must adhere to these key rules:
Houston's ordinance also requires that loan agreements be provided in the consumer's preferred language (English or Spanish) and that lenders give every customer a form listing non-profit financial assistance programs. Residents can file a complaint with the city's Administration and Regulatory Affairs Department.
Payday Loan Limits in Dallas
Dallas passed its pioneering ordinance in 2011, with the rules taking effect in 2012. The Dallas ordinance contains the same foundational protections:
All CABs in Dallas must register with the city. In 2021, the Dallas City Council expanded its ordinance to close a loophole, applying the same rules to other types of unsecured, small-dollar personal loans offered by the same lenders.
Payday Loan Limits in San Antonio
San Antonio enacted its protective ordinance in 2012, effective January 1, 2013. The city's regulations mirror the unified model and include:
Lenders in San Antonio must register with the city and pay a $50 annual fee. The city's Finance Department administers the program and investigates consumer complaints.
Payday Loan Limits in Austin
Austin adopted its ordinance in 2011, aligning with the unified standards of a 20% income cap, renewal limits, and the principal pay-down requirement.
Significantly, Austin's ordinance has withstood legal challenges from the payday loan industry. A 2023 court ruling affirmed that the city's ordinance was not preempted by state law, a major victory that solidified the legal authority of cities across Texas to enact these protections. Austin residents can report violations by calling 3-1-1.
The 20% income cap is a dynamic limit that scales with a borrower's financial situation, creating a consistent standard of affordability. Here is how to calculate your maximum legal borrowing amount in a regulated city.
Because this single $640 loan would utilize the borrower's entire 20% income allowance, a lender following the city ordinance could not legally issue another payday loan until this one is fully repaid.
Regardless of where you live in Texas, all consumers are afforded certain rights and protections under state and federal law.
Right to a Written Agreement
Before you sign, the lender must provide a clear, written agreement. This contract is legally required to contain specific information, including:
Prohibition of Criminal Charges
You cannot be arrested or prosecuted in criminal court for failing to pay a payday loan. Defaulting on a loan is a civil matter. Lenders are prohibited from threatening criminal charges unless there is evidence of forgery, fraud, or theft.
Fair Debt Collection Practices
Payday lenders and their collectors must abide by the Texas Debt Collection Act and the federal Fair Debt Collection Practices Act (FDCPA). These laws prohibit lenders from engaging in abusive, deceptive, or unfair practices, such as:
Right to Complain
If you believe a lender has violated your rights, you can file a formal complaint.
Before taking on high-cost debt, it is wise to explore safer, more affordable alternatives.
Payday Alternative Loans (PALs)
Offered by many federal credit unions, PALs are one of the best alternatives. Key features include:
Credit Union & Bank Personal Loans
Traditional banks and credit unions offer personal installment loans that are significantly cheaper than payday loans. While they require a credit check, they provide lower interest rates and predictable monthly payments. Even a "bad credit" personal loan from a reputable lender will have a much lower APR.
Local Non-Profits and Charities
Numerous Texas non-profits provide direct financial assistance or low-interest loans for emergencies. Examples include:
Employer-Based Programs
Some employers offer programs like paycheck advances or access to low-cost loans as an employee benefit. The Community Loan Center, for example, partners with employers to offer affordable small-dollar loans. Check with your human resources department to see if any such programs are available.
The answer to how many payday loans you can have in Texas depends on where you live. At the state level, a permissive legal framework places no numerical limit on borrowing, leaving many consumers vulnerable.
In stark contrast, a strong, coordinated movement by over 45 cities has created a protective shield for millions of Texans. For residents of Houston, Dallas, San Antonio, Austin, and other participating municipalities, the limit is a formula based on 20% of one's gross monthly income. This affordability standard, combined with strict rules on renewals and principal reduction, makes the loans more manageable.
The most crucial step for any Texan considering a payday loan is to understand the specific laws of their city. By knowing your local rules, asserting your consumer rights, and exploring safer financial alternatives, you can navigate unexpected financial challenges responsibly and avoid the high cost of predatory debt.
No, Texas state law does not set a specific legal limit on the number of payday loans a person can have simultaneously. However, individual lender policies and local city ordinances may impose practical restrictions on borrowing, making it difficult to secure multiple loans from different providers.
Yes, it is possible. Since Texas does not operate a centralized loan database, one lender may not be aware of a loan you have with another. This makes getting another loan feasible, but it significantly increases the risk of falling into a cycle of unmanageable debt.
City ordinances in Dallas, Austin, and other major Texas cities do not set a specific number. Instead, they limit the total loan amount to 20% of your gross monthly income. This rule indirectly caps your borrowing capacity, making it harder to qualify for multiple large loans.
The greatest risk is the debt trap. Each loan comes with high fees and interest rates. Juggling multiple payments can quickly become unsustainable, forcing you to borrow more just to cover existing debts, leading to a severe financial burden that is difficult to escape.
The state of Texas does not mandate a "cooling-off" period between payday loans. Legally, you could pay off one loan and immediately apply for another on the same day. This lack of regulation contributes to the potential for repeat borrowing and deepening debt for consumers.
In most cases, they don't have a reliable way to know. Without a statewide tracking system, lenders rely on self-reported information and checks with smaller credit bureaus. This gap makes it possible for borrowers to accumulate loans from several different Credit Access Businesses (CABs).
No, you cannot be arrested or face criminal charges for defaulting on a payday loan in Texas. Failure to pay is a civil matter. Lenders can, however, pursue a lawsuit against you in civil court, which could result in wage garnishment if they win a judgment.
This is a dangerous financial strategy known as "loan stacking" or "rolling over" debt. Using a new high-interest loan to pay an old one only adds more fees and interest to your total debt, digging you deeper into a cycle that becomes progressively harder to break.
Yes, it can. While payday lenders may not report to the three major credit bureaus (Equifax, Experian, TransUnion), defaults can be sold to collection agencies that do. Furthermore, mortgage and auto lenders often ask about payday loan usage, and multiple loans can signal financial instability.
The first step is to stop borrowing. Contact a non-profit credit counseling agency approved by the U.S. Department of Justice. They can help you create a budget and explore options like a Debt Management Plan (DMP) to consolidate your payments and negotiate with lenders.
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