Friday, January 17, 2014

Houston - the Latest Texas City to Adopt a Payday Loan Ordinance; Is the Industry Sweating?

In Texas payday and auto-title lending are $4 billion-a-year businesses, with some 3500 stores statewide. Our state has been referred to as the 'wild west' of payday and auto-title lending because of the lax standards. In the Lone Star State consumers take out larger loans and pay higher fees than any other state.

This year, we failed to get any legislation passed to strengthen the weaker ordinances enacted the previous session. So CitySquare, the Anti-Poverty Coalition of Greater Dallas (United Way of Greater Dallas, Catholic Charities, AARP) have been working on educating city officials throughout the suburbs to encourage them to enact the same local legislation Dallas has. Those laws include the law limits payday loans to no more than 20 percent of a person’s gross monthly income. Car title loans can be no more than 3 percent of gross monthly income or 70 percent of the value of the car that serves as collateral.

The rules also require that the loans be repaid in no more than four installments and that they not be refinanced or renewed more than three times.

The law also requires that fees not be capitalized as principal on the original loan. Read the rest of the ordinances here.

Since Dallas ordinance passed, Austin, San Antonio, El Paso, are among the larger city enacting the same legislation. And now Houston has apparently voted to adopt a similar ordinance.

Why? The damage can be seen in the fact Texans spent over $1 billion in payday loans and 35,000 used as collatoral in auto-title loans were repossessed. 

There are nine states with strict requirements; 15 states have no payday loan stores. And there you see the reason for the open season on people in dire financial straits.

State Senator and gubenatorial candidate Wendy Davis brought the issue front and center when she criticized and called for the resignation of William White, who was appointed by Governor Rick Perry as Chairman of the Finance Commission of Texas which oversees lenders in Texas. White is a Vice President of the Cash America, one of the largest payday lenders in the country. Cash America was recently hit with a $19 million dollar fine by the Consumer Finance Protection Bureau for its questionable business practices.

Senator John Carona, who did yoeman's work, after a fashion, in trying to get some regulation passed in Austin last session, failed in those efforts because of the strength of the payday loan lobby. Doesn't necessarily believe that these municipal ordinances work.He believes that the legislation he proposed. would have protected consumers "from the cycle of debt, while preserving their access to credit and the basic fundamentals that support our free market economy." That would be true if payday lenders were interested in such lofty notions. What they've proved they are committed to is profit at any cost.

Robert Norcross, spokesman for Consumer Service Alliance of Texas (CSAT), says Dallas' ordiances isn't working because more than 75 stores have closed in the past two years resulting in the loss of 200 jobs. "Unfortunately, we're playing political games with people's pocketbooks. If what we've seen in Dallas in the last two years is statewide, that would be a significant problem for the viability of the industry but, more importantly a significant probable to access credit for Texas borrowers..."

Actually the fact some payday lenders are going out of business is proof that the ordinances are working because the standards being used and supposedly adhered to are basic industry standards. If businesses can't adhere to improved industry standards they should go out of business. State Senator Rodney Ellis of Houston has it right, "No they don't want statewide regulation. What they want is a statewide card to keep abusing Texas families"

Consumer advocates like CitySquare, United Way of Greater Dallas and the rest of Anti-Poverty Coalition agree. It's time to stop abusing Texas families...

The rest of the articles can be read here.

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