Predators. This is how the mayor of Amarillo, Paul Harpole, describes certain access to credit companies, more commonly known as payday lenders or CABs, which benefit residents of the region.
“They tackle the fears of people who don’t understand credit, they tackle the fears of people who don’t believe their credit is as good as it could be, they tackle the fears of having to deal with a timely financial problem – a parent who is sick who must have money for the hospital, a parent who is in jail and wants to help, a family situation that is very emotional – they play about those emotions and fears to make those loans, ”Harpole said.
Two years after a city ordinance was passed cracking down on CABs, the number of payday lenders in Amarillo and the fees paid by those who borrow from them have dropped dramatically.
The Amarillo Ordinance, which was added to the municipal code in November 2014, regulates CABs “to protect the well-being of the citizens of the city of Amarillo by monitoring credit access businesses with the aim of reducing predatory and abusive lending practices “. It was modeled on an example from the Texas Municipal League and unanimously adopted by city council.
Regulations under the ordinance cover registration, record keeping, restricting the extension of consumer credit, requiring the consumer to understand the agreement and referral to advice. in consumer credit.
But state lawmakers are currently considering Senate Bills 1530 and 2178, which would respectively overturn existing municipal ordinances and give CABs the power to sue cities for such ordinances.
Citizens will be sent back to dangerous territory if these bills pass, Harpole said.
“Payday lenders have a very, very strong lobby. It would be a shame to see lawmakers give in to lobbyists’ wishes,” Harpole said.
“It hurts families, hurts residents, hurts voters. The Texas Legislature needs to think about its oath and the ethics involved in this kind of decision.”
The Texas Office of the Consumer Credit Commissioner has published quarterly and annual reports on various Texas metropolitan statistical areas and the CABs operating in those areas. In 2014, fees accrued on single payment loans by CABs in Amarillo amounted to $ 2,198,235. In 2015, it was $ 446,984. Annual figures for 2016 were not released as less than five CABs reported.
“The difference between Amarillo from 2014 to 2015 is really quite striking,” said Ann Baddour, director of the Fair Financial Services program for the Austin-based nonprofit Texas Appleseed.
Randy Schuster, a certified building official for Amarillo’s Building Safety Department, said the ordinance also reduced the number of CABs registered within Amarillo city limits.
The ministry had identified 35 possible companies when the ordinance was promulgated.
“Fourteen were already state licensed or exempt as these transactions were, again, already state licensed, ranging from pawn shops to state license lenders, financial planners, vehicle sales to engine, etc., ”said Schuster.
Then the number went down to ten – some just closed, others moved.
Shuster said the number of CABs registered within the city limits is 11.
The number of CABs residing just outside the city limits, however, appears to have increased. Along the farm-to-market roads leading into town, just beyond the town limits, Harpole said the issue has yet to be resolved.
All CABs registered inside and outside Amarillo city limits declined to comment or did not forward the calls to the Amarillo Globe-News.
It is impossible to contact or identify every potential CAB, Schuster said, due to lack of manpower and resources.
“We respond to complaints or reports of inappropriate credit extension or as you might call it,” Schuster said. “We had one last year and investigated it and came to a resolution on it that it was more of a misunderstanding than a violation.”
In addition to Amarillo, the Texas Municipal League has identified 40 other cities in the state that have promulgated CAB regulations.
Canyon regulated payday loan payments and refinances within city limits in early February, passing a TML-style ordinance as a precautionary measure. Currently, Danny Cornelius, Code Enforcement Manager for the City of Canyon, has stated that there are no CABs existing within the City of Canyon limits.
Lubbock almost became the 42nd city in Texas to pass an ordinance, but city councilor Juan Chadis’ proposal was rejected 5-2 in January.
According to the Lubbock Avalanche-Journal, the majority of board members agreed that the business model appears unethical, but questioned the city’s role in regulating a company’s morality or a citizen’s financial habits. They agreed that state and federal lawmakers should be urged to consider regulations.
Harpole said the regulation of CABs is a bipartisan need for the state.
“Many cities see the need for it,” said Harpole. “I don’t care whether it’s conservative zones or liberal zones, there is a need to watch (these companies).”
Baddour said the CAB business model is set up to evade Texas usury laws, which cap interest rates at 10%.
The lender follows the 10 percent rule, but there is no limit on the amount the ACR can charge as additional fees. The result is that borrowers can be caught in a never-ending cycle of debt, whether it’s a one-off loan, a variety of installment loans, or a title loan.
“The way the model is structured, the lender succeeds when the borrower fails,” Baddour said.
Some borrowers may be able to repay it successfully, even with hundreds or thousands of dollars in fees.
“And if you pay it off without success, you’ll pay forever,” Baddour said.
Harpole has said he wants the state to institute its own regulations on access-to-credit businesses, but locally the process has been successful in educating the public about the dangers of these businesses and alternatives to quick cash. . Harpole said he understands that many payday loans come under tight deadlines, but he encouraged residents to know long before emergencies happen if they can get a loan from a bank. or another credible lender.
“So many people don’t know their ability to borrow money or not and they are intimidated by the sources,” Harpole said. “They think they’re unworthy or whatever, and they are. They should go and investigate.”
Baddour said Texas Appleseed sees the need for short-term loans – honest and fair short-term loans. The local ordinances movement is one way Baddour has said this can be accomplished.
“It’s not a perfect solution, but what it does is… create a light at the end of the tunnel,” Baddour said. “This is a short term loan, let’s be honest so cities can’t cap fees. The fee cap would be really significant in the simplest solution, since cities can’t cap fees, let’s put at least one box around the transaction. “
Dr Daniel B. Prescott, Jr., interim CEO of Transformance, a Dallas-based nonprofit with a satellite office in Amarillo offering financial education and advice, said the organization had many clients who would find their way out of the payday lending trap.
“There’s a reason payday lenders structure loans in a way that makes them hard to get,” Prescott said. “But it can be done – through discipline and diligence.
“First, immediately reduce unnecessary expenses. Create a real budget that you must stick to at all costs. Second, negotiate more manageable payments for necessities like cell phone, cable, and insurance. In extreme situations, assets such as personal transportation and living conditions may need to be changed – at least in the short term. These measures should free up the cash needed to make payday loan repayments. “
If the debt is still too comprehensive, Prescott said that getting a loan from a credit union might be the best option because their interest rates are always much lower than a CAB.
Once a client has some financial stability, they can also ask their CAB for an extended payment plan, Prescott said.
“The most important factor is tackling a payday loan head-on,” Prescott said. “A default can cause irreparable damage to a consumer’s credit scores.”