Editorial: Program is worth a look as way to loosen grip of payday loan predators
April 27, 2016 at 11:36 p.m.
Though it does not cover every need, a lending program outlined by the Community Loan Center of Texas seems like a corker of an idea to help reduce reliance on odious payday loans for those who cannot borrow money elsewhere.
It also is a program that will not just happen by itself. It requires local lenders willing to take part and local employers who will sign up to help make it work through payroll deductions.
So far, Longview has neither of those elements, but we are hopeful the idea has been planted within the minds of those who could make this system work here.
If you missed the story Monday explaining it, here's how the program works: To be eligible for a loan, an applicant must work for an employer that is taking part. The employee can seek a loan for as much as $1,000 or half their gross monthly pay. The loans incur an 18 percent interest rate plus a $20 origination fee and are paid back through payroll deductions.
The program has been highly successful in the cities where it operates, which include Dallas, Houston, the Brazos Valley, Waco and the Rio Grande Valley.
Obviously, payday lenders exist in all those places, so it does not force those businesses to close their doors. But it does offer an alternative for some, and we believe every payday loan avoided can be good for the community.
The program provides a plus for the lenders, too. Many of the costs are covered in the processing done by Community Loan Center. That leaves the interest paid to go to the banks. It isn't much money, but it is worth more than the amount the banks would incur as an expense.
The fact this program is working in a number of other cities tells us it is worthy of continued investigation.
At least some who own payday lending establishments are critical of the program, which convinces us it must have some merit. If they did not think it could cost them some of their profits, why would they care?
What really needs to happen, of course, is for state legislators to pass laws to control how payday lending works in Texas. Had this ever been done, Longview would not have had to take action on its own.
Given that the Legislature is not likely to act — it has declined to do so before — we need to be responsible enough to take control. That's exactly what the Longview City Council did with its ordinance, and we are grateful for that.