Fort Worth, once the only major city in the state not to regulate payday lending, has joined dozens of other Texas cities in limiting businesses that have often been criticized as dangerous for low-income people. income.
In a split vote, Fort Worth City Council on Tuesday approved a new set of regulations designed to curb payday lenders and auto title lenders, often referred to as credit access companies. The vote came after more than a year of debate between council members and city staff on how best to regulate the industry.
With a payday loan, borrowers take out a short-term loan for typically less than $ 500, with a payment due when the borrower’s next payday. Depending on the lender, borrowers pay a fee, about $ 10 to $ 30 for every $ 100 borrowed. If the loan is renewed or renewed, a fee is charged again. Texas does not limit fees.
These loans are “predatory,” said board members Kelly Allen Gray and Dennis Shingleton, who have been strong supporters of the regulation.
Gray equated payday loans with dollar stores, which the council also recently voted to regulate. Both have become mainstream in her neighborhood, she said, pointing to a stretch of East Lancaster Avenue where dollar stores, moneylenders and pawn shops line the road.
“Does that solve the situation?” No, ”Shingleton said. “It’s a step in the right direction.
The board approved bylaw 5-3 with board members Cary Moon, Brian Byrd and Gyna Bivens voting against the bylaw. Mayor Betsy Price was in Washington, DC
The regulations require companies to access credit:
▪ Register annually with the city and post a certificate of registration.
▪ Keep records of borrowers, including the amount loaned, for at least three years.
▪ Provide information on non-profit organizations who offer financial education and training programs and agencies with cash assistance programs
▪ Provide loan information in the consumer’s preferred language. If a borrower cannot read, the lender should read the loan information to them.
▪ Limit the number of installment payments to four.
The ordinance limits cash advance loans to 20% of the borrower’s gross monthly income and auto title loans to 70% of the car’s value. Installments must be used to repay at least 25% of the principal amount.
Regulation has an impact on existing and future businesses.
The Fort Worth Star-Telegram drew attention to Fort Worth’s lack of regulation of payday lending with the profile of a woman trapped in debt in 2018. The latest solid conversation about payday loans between city leaders took place in a working session in August.
Payday lenders and auto title lenders often target those who are desperate for financial help, said Ann Baddour of Austin-based nonprofit Texas Appleseed. People with low incomes and with bad or no credit are the most likely to be harmed by payday lending and auto title lending. The high cost of loans coupled with the inability of the recipient can “trap them in a cycle of indebtedness forever”.
“These loans are very damaging to families and the community as a whole,” Baddor previously told the Star-Telegram.
Meanwhile, the payday lending industry has said it is providing the necessary cash flow to a population that otherwise would not be able to obtain loans.
Rob Norcross, spokesperson for the Consumer Service Alliance of Texas, told the Star-Telegram that stricter regulations on the payday lending industry restrict the ability of low-income families to obtain credit.
Byrd said he understands that some who have turned to payday loans find themselves trapped in cycles of debt. He called the financial education part “fantastic” but he couldn’t support the regulations.
He said he couldn’t find data to support claims that people are helped when municipalities pass payday loan regulations. He feared that restricting payday lenders and auto titles would increase the proliferation of pawn shops.
“People who need this money are going to get it any way they can,” Byrd said.
Moon agreed. The ordinance does not limit online payday loans because the city cannot regulate online activity. More and more banking transactions are being done online, Moon said, and payday lending will continue there.
Moon argued that the onus is on the federal government to regulate the banking industry.
Payday Loans In Texas
Almost 70 cities in Texas have enacted some sort of regulation to limit payday lenders and auto title lenders.
State regulations require licensing, data collection and legal disclosures, but laws dealing with the debt cycle many people face have collapsed in recent legislative sessions.
In Texas, payday loan showcases act as an intermediary between the borrower and a bank located out of state. Texas laws prevent borrowers from paying more than 10% to the third party, but a loophole allows the payday lender to charge uncapped rates and fees.
In the last session, the act creating the Office of the Consumer Credit Commissioner of Texas was amended to ensure that the agency has clear oversight power over online loans.
Representative Jim Murphy, R-Houston, sought an opinion from the Texas attorney general earlier this month on whether these companies could offer other products, like a signature loan.
At the federal level, two 2017 Consumer Financial Protection Bureau regulations reportedly required lenders to make sure people had the capacity to repay their loans and would protect people from charges if they did not have the funds to pay back. repay the loans. These have been delayed.
As many as 45 cities have enacted the Texas Municipal League Ordinance, which regulates business by requiring payday lenders to register with the city, provide credit counseling and keep records. The law also limits the amount of loans and the number of payments, among other things.
16 other cities have adopted zoning requirements that restrict payday lenders from operating near low-income neighborhoods, highways or certain distances from other lenders. At least six cities have passed ordinances that combine zoning rules and trade regulations.
Dallas became the first city to regulate the industry in 2011, and several other cities around Fort Worth have joined. Arlington passed an ordinance in 2015 with Hurst, Euless and Bedford in 2016. Grand Prairie, Flower Mound and Weatherford have ordinances with Austin, San Antonio, Houston and El Paso.