Earlier this year, the Texas Senate passed a bill regulating payday lending by, among other provisions, capping the amount of interest that may be served in Payday or Auto title loans. These loans are often the last refuge of those facing financial ruin, and all-too-likely unsuspecting borrowers are coaxed into a vicious cycle categorized by usurious interest rates. The proposal, however weak it was, died upon arrival in the Texas House.
Many municipalities in the State, however, regulate the businesses themselves. These include Austin, Dallas, El Paso and San Antonio (as well as smaller cities), all of whom have passed nearly identical ordinances. Today, Mayor Parker announced she would introduce the same regulations to Houston.
Speaking to press corps gathered at City Hall, Mayor Parker announced she would introduce these regulations to the City Council at the next meeting: December 4th. The following meeting, December 11th, would tentatively feature a vote on the regulations, with Parker adamant about accomplishing the passage of this ordinance by the end of the year. I also saw Finance Committee Chair, Councilmember Stephen Costello at the meeting. There may have been other officials there as well.
From the Press Release:
“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. 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.” –PARKER
Among the many item the ordinance sets out to accomplish:
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
Obviously, the most pressing thing that jumped out at me is the exclusion of something that sets an unequivocal ceiling on interest rates. The focus, rather, is on things such as transparency and limits on abusive principal amounts and/or fees. This is not surprising given Mayor Parker’s focus on imitating other City’s ordinances. I have read Austin’s ordinance in the past and been very supportive, so while I have not read a copy of the specific Houston proposal at this time, I imagine I will have mostly positive feelings on the matter.
If the Mayor is still intent upon enacting Food Truck reforms by the end of the year, she will certainly have a most productive last few months of her second term. Forget about Julian Castro, perhaps Texas Democrats have found a new savior.
Dos Centavos has more.