Texas Cities are Outlawing Payday Loans

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Payday lenders are typically governed by state law. Depending on what border they wish to operate within, lenders will need to abide by that state’s particular laws. Texas currently permits payday loan operations, and allows lenders to charge a maximum of 309 percent on a 14-day $100 loan.

But some Texan cities aren’t happy with their state’s relaxed short-term lending laws.

According to the Texas Tribune, city councils across the Lone Star State have taken it upon themselves to outlaw payday loans from their local communities by imposing local ordinances.

“There was a huge push to have some consumer protection… that would reduce the cycle of debt and the huge charges that are part of [the payday and auto title lenders’] business model,” said Ann Baddour, a senior policy analyst for Texas Appleseed, a nonprofit advocacy and research group, according to the Texas Tribune. “Nothing that directly addresses the business model passed the Legislature last session. The cities have felt the pressure to take action.”

City governments in Dallas, Austin, San Antonio, Brownsville, Irving, Mesquite, Sachse, Richardson and Garland and Little Elm have all passed zoning ordinances limiting the expansion and proliferation of payday lenders within their borders.

“In Dallas and Austin, we are leading the fight at the local level, because the state has been hindered by the significant lobbying effort that the industry has taken on,” said Barksday English, a policy aide for Austin City Councilman Bill Spelman.

English told the Texas Tribune that the payday loan industry has sunk its teeth into state-level policy makers, so passing state law prohibiting payday loans simply won’t happen at this time.

“The industry definitely hired two of the most active and influential lobbyists here in Austin,” he said, referring to the lobbyist firm Armbrust & Brown. “Their lobbyists have been in constant contact with our office since December. In the course of the last 10 days leading up to the vote, they were meeting with other council members as well.”

Armbrust & Brown did not respond to the Texas Tribune’s calls seeking comment, but The Consumer Service Alliance of Texas (CSAT), a trade association composed of short-term lenders, has had no qualms making its voice known.

“CSAT respects the right of a city to impose reasonable spacing, parking, and signage guidelines on businesses that operate within the city limits,” said the association in a statement according to the Texas Tribune. “However… when ordinances restrict access to credit [and] eliminate consumer choice… the ordinances have gone too far and will have unintended consequences.”

CSAT has filed a lawsuit against the city of Dallas for passing a previous ordinance that requires payday loan lenders to register with the city and limit some of their lending standards.