Wendy Davis is beginning the new year attacking her Republican opponent, Texas Attorney General Greg Abbott, over payday loans.

Payday lending is considered by many to be the practice of trapping largely low-income individuals with short-term loans with interest rates that can reach as high as 500 percent.

As reported by Texas ABC affiliate, KVUE, Davis told their sister station WFAA that “It’s not at all uncommon in Texas for a $300 payday loan to become a $1,000 repayment obligation in only a three month period of time, and it happens a lot.”

At the heart of her attack on Abbott is a letter he sent to Texas Office of Consumer Credit Commissioner Leslie Pettijohn back in 2006, a letter she claims led to the proliferation of these short-term lending businesses throughout the state.

In the letter, Abbott described receiving a request from then-state Sen. Eliot Shapleigh (D-El Paso) to review whether payday lenders were in violation of state consumer laws limiting interest rates by operating under the model of “credit services organizations (CSO).” Such organizations act as middle-men by securing a loan for a customer through an independent, third party lender and charging fees.
 
Emphasizing his analysis did not constitute a formal opinion, Abbott replied that nothing in the law prevented payday lending businesses from operating as CSOs, so long as they are independent from the organization providing the actual loan. Abbott further noted that CSOs are allowed to charge unlimited fees for their services. He closed the letter by stating, “Any discussion of whether the use of this model is the best public policy for the State of Texas is one that must be addressed by the legislature and has not been explored by this office.

According to Hector Nieto, the spokesperson for the Lone Star Project, the group who discovered the letter, Abbot’s analysis paved the way for payday lenders to find ways to skirt Texas laws limiting interest rates:<

“Prior to 2006, there were only about 300 payday lenders in Texas. Now, as a result of this letter, there are over 3,000 payday lenders in Texas. That’s more than Whataburgers and McDonald’s combined.”