Joining Austin, Dallas, El Paso, and San Antonio, Houston is on track to become the fifth major city in Texas to pass tighter restrictions on the payday and auto-title loan industry. Mayor Anise Parker's recently revealed regulations for payday lending reflects the minimum standard business practices for payday lending institutions that have passed in other cities as means to prevent borrowers from being trapped in a cycle of debt.
Many interest rates for payday loans, when including fees, often exceed 500 percent APR. With support from numerous advocacy groups, Mayor Annise Parker joins other municipalities who have taken the initiative in light of inaction from our State Legislature to rein in high-cost, small-dollar loans offered to individuals without credit checks, which frequently preys upon low-income Texans.
Progressive leaders have been working overtime to protect consumers while Republicans have allowed the payday lending industry take between $800 million and $1.1 billion in excess fee charges from Texas families.
Read more below the jump.Under existing law in Texas, there are no limits to the fees payday lenders and auto title businesses can charge, and there are no limits on the number of times they can charge high-fees for essentially the same loan, which means the Legislatures' many failed attempts weigh heaviest on the backs of those in our state who are least able to repay them.
“I had initially favored a Houston-specific measure, but decided that joining with other Texas cities in a united front on this issue is the best way to send a strong message to the Texas legislature,” said Mayor Parker. “Lenders deserve to make a profit on their investments, but not by charging astronomical interest rates to desperate consumers who have nowhere else to turn for emergency financial assistance. The statewide model I am recommending for approval by Houston City Council achieves this balance.”
The proposed ordinance, which will be available for a vote by the Houston City Council on December 11th includes the following:
– Requiring payday loan and auto title loan businesses to register with the city annually
– Limiting payday loans to 20 percent of the borrower's gross monthly income
– Limiting auto title loans to three percent of the borrower's gross annual income or 70 percent of the vehicle value, whichever is less
– Limiting single payment loans to no more than three refinances or rollovers and installment loans to no more than four installments
– Requiring each installment, refinance, or rollover payment to reduce the total principal owed by at least 25 percent
– Defining a rollover or renewal as a loan within seven days of the previous loan
– Requiring loan agreements to be written in easy-to-understand language
– Requiring contact information for nonprofits offering financial literacy and cash assistance
While this session the Senate passed SB 1247, the Payday Lending Reform Bill with bipartisan support, the bill died early on in the House Committee on House Investments and Financial Services. Even though the House companion was carried by Committee Chair Representative Mike Villarreal, the committee hosted some very friendly legislators to the payday lending industry. Committee vice-chair Dan Flynn (R-Van) has received the third highest amount of financial support from payday loan interests ($50,500) out of any House member according to Texans for Public Justice. When faced with the ability to prevent Texans from entering a cycle of debt, Representative Flynn said, “I'm a little offended when someone wants to assign a morality to an issue of a business.”
Many Democrats in the legislature who supported moving forward on state regulation such as Senator Sylvia Garcia have already praised Mayor Parker's proposal:
Senator Garcia on Mayor Parker's Proposed Payday Lending Regulations
“I applaud Mayor Parker and the Houston City Council for presenting a package of payday lending regulations to protect our citizens from unscrupulous payday lenders. The proposed package is modeled after an ordinance that was passed by the City of San Antonio and other major urban cities. I look forward to supporting Mayor Parker and the city council's efforts to pass a Houston ordinance as quickly as possible.”
Mayor Parker is also backed by a strong coalition called the Houston Fair Lending Alliance, made up of several faith-based organizations, as well as Texas Appleseed, United Way of Greater Houston, and AARP. Ann Baddour of Texas Appleseed, an organization based in Austin which focuses on social and economic justice, says cracking down on payday lending in Texas' largest city with the highest number of payday and auto-title stores is “a really big statement.” This is yet another win for Texans thanks to progressive municipal leaders who are willing to overcome the challenges brought by big money and conservative stagnation. As Houston moves forward with this ordinance, hopefully more cities will take on this threatening industry and continue to work in favor of consumers.