Bills have been filed to check cities from controlling payday loans providers
Brownsville is among the forty communities in Texas that have passed a uniform ordinance to put a check on certain practices of the payday loans/auto title industry within the limits of the city. However, recently a piece of legislation have been filed known as House Bill 3081 that will strip the right of the communities to use that authority. The legislation has been sponsored by Rep. Giovanni Capriglione, R-Southlake and the legislation is expected to make the payday lenders subject to only federal and state law.
The ordinance of Brownsville was passed in October 2014 and it is based on a similar ordinance that was implemented by Dallas in the year 2011. The Dallas ordinance had withstood a legal challenge in its initial days and later it was overturned because of an appeal by the industry.
Industry’s critics are of the opinion that the business model have been set up with an intention to trap the customers in a never-ending cycle of debt. Customers are burdened with exorbitant fees that force them to refinance. The uniform ordinance wishes to limit payday loans to twenty per cent of the gross monthly income of the borrower. The ordinance further limits auto title loans to three per cent of the annual gross income or seventy per cent of the value of the vehicle, whichever is lower.
Moreover, the ordinance limits loans to only 4 payments, irrespective of rollovers or installment payments. Each payment is supposed to pay down the original principle by twenty-five per cent so that the full amount of the loan is paid in 4 payments.
The executive director of United Way of Southern Cameron County, Traci Wickett, said that the objective of the ordinance is to address the most shocking practices of auto title/payday lenders.
She cited a 2015 study of the activities of payday lending, which showed that only in the Brownsville metropolitan statistical area loans amounted to $20 million in revenue, $19.5 million in fees and $35 million in refinancing. In the auto title industry, there were fifteen cars a week that was being repossessed by auto title lenders.
Wickett said that in her area, 67% of single-payment transaction is made up on refinancing. On an average, buyers pay $1.49 in fees in exchange for each dollar that they have borrowed. She suggested that the residents get in touch with their state representatives and make known their feelings on the legislation that would preempt the uniform ordinance of Brownsville.
The director of the Fair Financial Services program at the Austin-based non-profit Texas Appleseed, Ann Baddour, said that meaningful improvements have been made by the uniform ordinance in the communities that have adopted it. It has led to lesser repossessions of vehicles and lower fees for the borrowers.
HB 3947 is another bill that has Ann Baddour worried. This bill would allow state licensees including auto title and payday lenders to sue municipalities over ordinances that they think have an adverse impact on the economy. She said that the Rep. Jodie Laubenberg, R-Parker introduced this legislation as a back-door approach to preempting the uniform ordinance.
During the April 11 hearings, both the bills were the subject and there were copious testimony from the social service non-profits, faith community and others in support and opposed of the uniform ordinance. She said that it is not clear as to how much support the bills have in the Legislature.
Baddour said that she is very much concerned about both the bills. She is hoping that it will not move out of committee. It is to be seen that who wins – the bill supporting the payday loans and auto utility lenders or the uniform ordinance.
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