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Partnerships Address Payday and Auto Title Lenders in Dallas

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By Rev. Gerald Britt


Last year, very important legislation was passed which impacted the operation of payday and auto title lenders in Dallas and throughout our state. If you or anyone you know is in financial difficulty and considering a short term loan, these laws protect your rights as a consumer.

During last year’s state legislative session, the Anti-Poverty Coalition of Greater Dallas (including, CitySquare, Friendship West Baptist Church, the United Way of Greater Dallas, the Jewish Community Relations Council, Catholic Charities, along with a number of other non-profit agencies and service providers) joined the Christian Life Commission, Texas Appleseed, Texas Catholic Charities and 500% Interest is Wrong, urging Texas lawmakers to address the exploitative practices of short term lenders.

Payday and auto title loan outfits create a cycle of debt by charging high fees which mask interest rates which can be upwards of 500% APR. With short terms and no partial payments, borrowers often must borrow again at 500% APR in attempts to pay off the loan. The average payday borrower in Texas pays $840 for a $300 loan.

This state-wide collaboration was successful in getting two bills passed which place new restrictions on Credit Service Organizations (most payday and auto title lenders in Texas are registered as CSOs and will be impacted by this legislation). CSOs are now required to:

•       Register with the Office of Consumer Credit Commissioner, and the licensing fee will fund the Texas Financial Education Endowment
•       Report on consumer and transaction data
•       Clearly disclose fees, typical repayment patterns, and fees of comparable loans
•       Post an OCCC helpline number for consumers
•       Provide restitution to customers injured by a violation of CSO regulation or Finance Code

Locally, the Anti-Poverty Coalition prevailed in their efforts to get Dallas’ City Council to take action against predatory lenders. On May 25, 2011, the Dallas City Council unanimously passed a zoning ordinance requiring alternative financial institutions to:

•       Operate at a minimum distance of 1,500 feet from another location
•       Operate at a minimum distance of 300 feet from a lot in a residential district
•       Operate at a minimum distance of 500 feet from an expressway
•       Only operate in a freestanding building
•       Possess a Specific Use Permit (SUP) in all permitted districts

On June 22, 2011, the Dallas City Council unanimously passed a regulatory ordinance requiring:

•       The loan principal for a payday loan to be capped at 20 percent of the borrower’s gross monthly income, and auto-title loans are capped at 3 percent of the borrower’s gross annual income
•       Limits payments to four installment loans with no renewals, or a single payment loan with three renewals or rollovers
•       Each installment or renewal payment pay down 25% of the loan principal

These ordinances took effect January 1.

Predatory short term lending drains wealth out of our communities and hamper economic development. More and more, cities are increasingly concerned that payday and auto title loan outfits depress property values, become magnets for crime and give our communities a look of economic decline.

The economic health of our families and our community is dependent upon being smart about the nature of the businesses that court our patronage. The exploitation of those in financially desperate circumstances is best combated with financial education and the public engagement necessary to make certain these businesses operate with integrity.

The Rev. Gerald Britt Jr. is vice president of public policy at CitySquare.org. Rev. Britt blogs at changethewind.org.  and writes a monthly column for the Dallas Morning News. His e-mail address is gbritt@citysquare.

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