The most important thing to understand about Texas payday loan laws is what they do not do: there is no statewide cap on what a short-term loan can cost. Texas regulates who may arrange these loans, how they must disclose the price, and what happens when you default — but not the price itself. Roughly fifty Texas cities, El Paso among them, filled that gap with their own ordinances.
Quick answer: Texas licenses short-term lending through the Credit Access Business model in Finance Code Chapter 393. The lender’s interest is capped by Chapter 342, but the CAB’s fee is not — the statute expressly denies the OCCC authority to limit it, which is why effective APRs run 300% to 660%. City ordinances, not state law, cap loan size and rollovers.
The Credit Access Business model, and why it exists
Texas does not license payday lenders the way most states do. Chapter 393 of the Finance Code created a different structure: the Credit Access Business, or CAB. A CAB is a broker. It arranges your loan with a third-party lender and guarantees repayment to that lender, and it charges you a fee for doing so.
The split matters because the two halves are regulated separately:
- The lender’s interest falls under Chapter 342, which does constrain rates on small consumer loans. On a two-week advance this is usually a few dollars.
- The CAB’s fee falls under Chapter 393, which contains an unusually blunt sentence: nothing in it grants the Finance Commission or the Office of Consumer Credit Commissioner authority to set a limit on the fees a credit access business charges.
That single provision is the whole reason Texas short-term credit is among the most expensive in the country. Any article that describes a Texas payday loan as a 10% loan is quoting the interest line and ignoring the fee line, which is typically more than 80% of what you pay.
What state law does control
Plenty, just not price. The protections that apply everywhere in Texas:
| Area | What the law requires |
|---|---|
| Licensing | Every CAB must hold an OCCC licence, and the OCCC publishes a searchable licence lookup |
| Disclosure | A written fee disclosure before you sign, showing interest, the CAB fee and the resulting APR |
| Cancellation | You may generally rescind by the close of the next business day, without penalty, by returning the funds |
| Criminal charges | A lender may not pursue criminal charges over a dishonoured check given for a payday loan, except in cases of actual fraud |
| Complaints | The OCCC accepts and investigates consumer complaints against licensed businesses |
The criminal-charges point deserves emphasis, because threats of arrest are a recurring abuse in this market. Falling behind on a payday loan is a civil debt matter. If a business tells you otherwise, that is a complaint worth filing.
The OCCC also keeps tightening the administrative rules: it posted amendments to the CAB licensing and recordkeeping requirements on 15 July 2026. Those govern how businesses operate and what records they keep — not what they may charge.
Where city ordinances take over
Because the Legislature left price and size alone, Texas cities acted. Around fifty adopted a common model ordinance, including El Paso, Austin, Dallas, San Antonio and Houston. The typical package caps a payday advance at 20% of the borrower’s gross monthly income, caps title loans against vehicle value, limits repayment to four installments or three renewals, and requires each installment or renewal to retire at least 25% of the principal.
El Paso’s version lives in Chapter 5.17 of the City Code and has been in force since 8 January 2013. It also requires every credit access business to register with the City on top of its state licence, to document your income from a pay stub or equivalent, and to keep the supporting records for at least three years for City inspection.
It is worth being clear about what has and has not changed. Bills to impose a statewide rate cap have been filed in multiple Texas legislative sessions and none has become law; the city-ordinance patchwork remains the only meaningful limit on loan size and duration. Anyone telling you Texas recently capped payday rates is describing a bill, not a statute. Check the OCCC’s published rules rather than a lender’s summary.
The practical consequence is that the same loan is a different product depending on which side of a city line you sign it. A borrower in an ordinance city has a hard ceiling tied to their income and a defined end to the debt. A borrower in unincorporated Texas has neither. If you live in El Paso, that protection is real and worth asking about by name.
Using the law in practice
- Verify the licence first. Check the OCCC lookup rather than trusting a website’s claim. Unlicensed online operators, including some that claim tribal affiliation to argue state law does not reach them, are the single biggest source of complaints.
- Demand the disclosure before you sign, and read the total cost of credit rather than the rate.
- Ask which city ordinance applies and how your maximum was calculated. In El Paso the answer should reference 20% of your gross monthly income.
- Know the cancellation window. Next business day, funds returned, no penalty. Get the cancellation confirmed in writing.
- If you are a covered service member — and around Fort Bliss many borrowers are — the federal Military Lending Act caps most consumer credit at 36% MAPR, far below anything the Texas market offers by default.
And before any of that, price a credit union. Federal credit unions can offer Payday Alternative Loans capped at 28% interest, and in El Paso both GECU and First Light Federal Credit Union serve the metro. Texas 211 lists rent and utility assistance county by county.
Frequently asked questions
Not under state law. The limit comes from city ordinances: in El Paso and around fifty other Texas cities, a payday advance may not exceed 20% of your gross monthly income. Outside an ordinance city there is no size cap.
There is no effective maximum. The lender’s interest is capped by Finance Code Chapter 342, but the Credit Access Business fee is not, and the statute specifically denies the OCCC power to limit it. Effective APRs commonly run 300% to 660%.
No. Texas law bars pursuing criminal charges over a check given for a payday loan except in cases of actual fraud. Non-payment is a civil matter, and a threat of arrest is grounds for an OCCC complaint.
State law does not set a limit. City ordinances do — El Paso allows no more than three renewals, each of which must reduce the principal by at least 25%.
The Office of Consumer Credit Commissioner licenses and supervises credit access businesses and accepts consumer complaints. In an ordinance city such as El Paso, the city itself also enforces its own registration and recordkeeping rules.
This article is educational and is not financial or legal advice. Before you borrow, confirm the business is licensed with the Texas Office of Consumer Credit Commissioner (OCCC) and registered with the City of El Paso, and read the fee disclosure in full.