This is the 3rd guest blog post in a series of 10 by Leah Gonzalez, a master's degree student in social work at the University of Texas in Austin.
Since the Texas legislature meets every other year a lot of work needs to be done during the interim. Payday and auto title lending policy is no different. Several cities throughout Texas have passed ordinances that take further measures to protect their residents from becoming entrapped in the payday and auto title lending cycle.
The most action has been taken by three major Texas cities - Austin, San Antonio, and Dallas. Regulations in these cities limit how much a lender can lend and set zoning requirements for where a lender can set up shop. In these three cities, a payday loan cannot exceed 20 percent of the consumer's monthly income (Mcusic, 2012), and in hopes of breaking the debt cycle experienced by many with this kind of loan, increased payments are required. Higher payments may seem counterintuitive, but increasing the payments to include 25 percent of the total repayment needed can reduce the principal owed and limit the times a loan can be renewed to only four (Texas Faith for Fair Lending, 2012).
It's not just major cities making headway in payday and auto title lending policy reform; several smaller cities have taken action my implementing zoning requirements for lenders. Brownsville, Mesquite, Greenville, Irving, Sachse, Richardson, Garland, and Little Elm have passed ordinances in hopes of limiting payday and auto title lenders from targeting and creating clusters in certain areas of town (Texas Faith for Fair Lending, 2012).
Possibly the most interesting aspect of these ordinances is the reaction from the payday lending industry (Consumer Service Alliance of Texas, 2012). Although the payday lending industry has sued both Dallas and Austin (Heinrich, 2012), they also support "uniformity of laws" (Consumer Service Alliance of Texas, 2012). The ordinances are customized regulations per city. Potentially, every city in Texas could pass similar local legislation. These varying regulations pose a logistical problem for the industry.
Consumer advocates in favor of more comprehensive lending regulations have noted that the industry has even come to support a statewide standard. If the payday industry supports state legislation, this could be the open door consumer advocates can use to establish a collaborative process working toward fair lending.
Consumer Service Alliance. (2012). CSAT launches accountability program to give texas consumers greater confidence in small, short-term lenders. Retrieved from http://smallbiztrends.com/press-release/2012/09/csat-launches-accountability-program-to-give-texas-consumers-greater-confidence-in-small-short-term-lenders/.
Heinrich, H. (2012). Texas cities take action to regulate payday lenders. The Texas Tribune. Retrieved from http://www.texastribune.org/texas-issues/predatory-lenders/faced-city-ordinances-payday-lobbies-reappear/.
Mcusic, T. (2012) Reports show scope of payday lending. Star-Telegram. Retrieved from http://www.star-telegram.com/2012/09/28/4296517/report-shows-the-scope-of-payday.html.
Texas Faith for Fair Lending. (2012). Payday & auto title lending in texas a debt texas families can't afford. [Brochure].