Fort Worth TX Largest State To Not Regulate Payday Loans
Rebecca Anthony needed a little help getting food on the table.
She had already received help from a church and friends, but it was not enough to prepare full meals for her mother, two daughters and her boyfriend, she said. So last month she went to a ACE Cash Express, a payday loan store, for $ 490. This small loan will cost her around $ 1,700, she said, after she finishes paying fees, interest and principal.
â€œWe had hardly any food at home. We just wanted to earn a little, but we also wanted to be able to finish paying our bills, â€she said. â€œWe ended up pushing ourselves a bit, I think. “
This loan was the third she took out this year. The other two – $ 1,000 in January to make ends meet after her mother lost her job and $ 600 in April to help her buy a car she could no longer afford – were from loan companies on online salary. She expects to pay around $ 5,000 for the $ 2,000 she initially needed.
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.
Fort Worth remains the last major city in Texas without regulations or zoning for payday loan storefronts, often referred to as access-to-credit businesses, like Bedford where Anthony borrowed $ 490. State regulations require licensing, data collection, and legal disclosures, but laws dealing with the debt cycle facing people like Anthony collapsed during the legislative session.
These loans are great for low-income people and those struggling to get credit through traditional means. This is the same population that is at risk of being caught in a cycle of debt, said Ann Baddour, of the Austin-based nonprofit. Texas apple seed.
Baddour said the loans “fuel desperation”.
â€œIt extends to the middle class – teachers, students, those who are temporarily losing their jobs,â€ Baddour said. â€œIt was already a problem, but it is growing.
But representatives of the payday loan industry say the loans provide the money needed by an undeserved population, and tighter regulation only hurts low-income families.
“These orders limit access to credit to those who need it,” said Rob Norcross, spokesperson for the Texas Consumer Services Alliance.
Payday Loans In Texas
In Texas, the payday loan showcase acts 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. Texas is now the only state with this loophole, Baddour said.
â€œTexas is increasingly becoming an outlier across the country in terms of monitoring payday loans,â€ she said, calling Texas a â€œblack holeâ€.
Without statewide laws, it’s up to municipalities to regulate payday loans, Baddour said.
In 2017, nearly 115,000 new payday or auto title loans were taken out in the Fort Worth area, which includes Arlington, according to the Texas Office of Consumer Credit Commissioner. That year, new loans were valued at nearly $ 121 million, up from around $ 189 million in 2014, when around 156,000 new loans were taken out.
The decline in payday lending activity around Fort Worth is likely the result of regulations being passed by neighboring towns, Baddour said. Arlington adopted an ordinance in 2015 with Hurst, Euless and Bedford next in 2016. Grand Prairie, Flower Mound and Weatherford have ordinances with Austin, San Antonio, Houston and El Paso.
Dallas became the first city in Texas to bring these businesses under control in 2011. The regulation reduced the number of payday loan stores from 220 in 2011 to 65 in 2017, according to the Dallas Morning News. The city was sued shortly after the ordinance went into effect. The order went to the Texas Supreme Court, which upheld the city’s payday loan restrictions.
Today, more than 40 cities have passed business regulations, 16 have adopted zoning or land use restrictions and six have done both to regulate payday lenders, according to the Texas League of Municipalities.
Fort Worth was a heret in the regulation of payday loans, but it’s unclear why, said City Councilor Kelly Allen Gray. Gray wants that to change, and when city council meets again on Dec. 4, she plans to discuss what steps Fort Worth can take.
â€œWe owe it to the citizens of Fort Worth to have this conversation,â€ Gray said, noting that she was not yet sure what regulations the city should put in place. â€œFor single parents, families living paycheck to paycheck, payday loans have been an answer, but what else can we do? We need to help them in a way that is not just rhetorical. “
Fort Worth options
Most cities require payday lenders to register with the city, limit the number of payments to four, and limit the number of times a loan can be renewed or refinanced. Some ordinances classify a new loan made within seven days of paying off a previous loan as a renewal. In most cases, the business is required to provide information on credit counseling.
Another option is for the city to limit where payday loan shops can open through zoning and land use permits. Unlike business regulations, zoning would only impact future businesses, not current storefronts. Such zoning could limit store fronts along major roads or in low-income areas or prevent multiple stores from opening in close proximity to each other.
Norcross said the payday loan industry is not opposed to fair zoning, but draws the line with city ordinances.
The industry argues, he said, that regulating the amount of the loan or the number of payments that can be made ends up costing people more. Borrowers will simply take out multiple loans, travel to another city, or borrow online, which can lead to higher interest rates and fees, he said.
At the state level, new invoices are introduced at each session regarding payday loans which, if adopted, can replace local regulations.
At least one municipal ordinance, that of Austin, is in dispute.
Meanwhile, the Federal Bureau of Consumer Financial Protection is expected to release payday lending rules next year.
â€œWhat the Ordinance has done, ironically, is harm those it is designed to help,â€ Norcross said. “I don’t know why we would want to pass an ordinance with these other things coming up.”
Gray said she would encourage city staff to continue researching options, which could include using the League of Municipalities model or drafting a specific model for Fort Worth.
Regardless, Gray said the council should also focus on what can be done to help residents live paycheck to paycheck.
â€œWe need to figure out, if we say no to payday loans, what we are putting in place to help working families when they are up against a wall,â€ she said.
Help those who need it
For Anthony, who works in housekeeping at Texas Health HEB, the loans crippled his finances. Before the original loan, she said she and her family saved small amounts of money each month, but now have payday loan bills in addition to her student loans and traditional bills.
Anthony pays around $ 580 per month on his two outstanding payday loans. With the help of Catholic Charities, she hopes to pay off the balance before next spring. She also owes several thousand student loans.
â€œWe’re going to make it work,â€ she said. “It’s going to be hard. It’s more difficult now than before I got the loans.
the Catholic Diocese of Fort Worth, and other faith groups, have been at the forefront of helping low-income families.
The church first noticed a cycle of indebtedness from those it helps about five years ago, said Jennifer Carr Allmon, executive director of the Texas Catholic Bishops’ Conference. People would seek help, either through the parish or Catholic charities, in the amount of $ 100 to $ 300 to cover their bills while owing $ 400 or more to a payday lender, a she declared.
A survey around this time found that a third of those assisted by the church needed monetary assistance equal to or greater than the amount they owed a lender. Millions of dollars have probably been taken from charities that help people with payday loans.
â€œIf they didn’t have the loans, they wouldn’t need our help,â€ she said. â€œIf these loans create dependency on charity, we have to end it. “
Anthony said she regretted the payday loans, but didn’t know where to turn.
â€œEvaluate your options,â€ she says. “If you can get help elsewhere, please do so.”