City Hall Hustle: With interest: Council tries to regulate predatory lenders without government action – News
Perhaps not many of the readers of Hustle have had one lately Payday loan – Easy money offered by unregulated lenders at predatory rates. That doesn’t mean their ordinance is a bad idea, and councilor this week Bill Spelman offers two articles on the regulation of the laissez-faire industry. “We need to break the debt cycle these little dollar lenders are forcing their customers into,” Spelman said in a press release announcing his resolutions. “When Texans end up paying 500% interest on loans just to meet their basic living needs, there is a problem that needs to be addressed.”
The resolutions that were put on the Council’s agenda this week (Thursday 18 August) address the issue on two fronts. One deals with land use and zoning for businesses, modeled on a similar resolution by the Dallas City Councilor Jerry R. Allen (whose office has consulted Spelman). Noting that “the city of Austin does not have the power to regulate interest rates, it does have land use powers,” the resolution prohibitsalternative financial services company“- including payday and auto title rental companies, but excluding banks, grocery stores, and convenience stores – from locations within 300 feet of each other, within 150 feet of an interstate, within 60 feet of residential areas, or anywhere in East Austin. Of the city Overlay District, Waterfront Overlay District, or University Neighborhood Overlay District. Chris Riley and Mike Martinez are obliged to act as co-sponsors.
The second resolution, while powerless against the exorbitant interest rates of such lenders, aims, according to its language, to “protect the well-being of the city’s citizens by monitoring loan access operations to reduce abusive and predatory lending practices”. This would be achieved by capping payday loans to a verifiable 20% of an applicant’s monthly income and car title loans to 70% of the retail value of the vehicle or 3% of the gross annual income of the owner, whichever is lower. The extension of the loan may not be longer than four installments, with the proceeds paying off at least 25% of the principal in each installment. Also, loans cannot be refinanced or “rolled over” more than three times – the revolving trap that most borrowers fall into. It also creates a registration database of payday and auto title rental companies and requires viewing of an annual certificate of registration and maintenance of rental records. Any offense would be a Class C offense that could result in a fine of $ 500. Mayor Pro Tem Sheryl Cole and Laura Morrison are named as co-sponsors for this item (so that’s probably five votes).
The 82nd legislative term recently passed payday loan regulation, due to some objections that the bills did not go far enough (e.g. they do not limit interest rates). Spelman called the laying move “an important first step,” adding, “It is now up to the city council to go as far as possible to help Austin residents trapped under a vicious and unfair mountain of debt.”
Members of this legislature attended a press conference this week highlighting the initiatives. Austin Rep. Eddie Rodriguezwho worked with former House speakers Tom Craddick on regulating predatory lending, admitted, “We moved the ball forward pretty well, it just died towards the end. But that really crosses party lines. We have voters who are affected. “Driving the point home was Republican Sen. Jeff Wentworth, who used decidedly blunt rhetoric and quoted a speech by a Marine Corps Major General. Mike Lehnert Describe payday lenders as “parasites, bottom-feeders, and bastards”. (Spelman’s resolution states that the Department of Defense has found these loans ‘undermine military readiness, damage the morale of troops and their families, and increase the cost of raising an all-volunteer combat force.’ “)
Was also at hand Walter Moreau, Managing director of Foundation communities, a non-profit housing association that offers free financial education among its many services. He told the story of a customer who every time he renewed the loan he borrowed $ 500 from a predatory lender at an interest rate of $ 100. He rolled it over seven times; Moreau said a lender lobbyist admitted that seven rollovers were actually the industry average.
At the press conference, the media discussed the city’s power to regulate lenders. When asked if he had heard convincing arguments from lenders, Spelman said, “I haven’t heard it yet.” Without regulating interest rates, he called the measure “a first, very ‘toe in the water’ regulation” of the industry. In response to every legal challenge, he said, “I would love if you defend a 620 percent annual loan.”
Mayor Pro Tem Cole also provided a context in which he stated that the leadership of the city “cannot just be about environmental responsibility and economic development”. It was a welcome reminder that many of the troubles that keep Austin troubled go well beyond the minds of many citizens just struggling to get through.
Here’s an interesting article: The Hustle is on Twitter @CityHallHustle.