Payday lending business representatives push back against Longview City Council proposal
Jan. 14, 2016 at 11:54 p.m.
An ordinance designed to restrict local lending business dominated discussion during Thursday's City Council meeting, with representatives of such businesses defending what they offer as crucial to the working poor in the community.
Modeled on a version provided by the Texas Municipal League, the ordinance being crafted by city legal staff puts restrictions on "credit access businesses." The ordinance specifically addresses loan terms, such as the amount of the loan and how many times it can be refinanced.
The proposed ordinance and the letter sent to potentially affected businesses can be found at longviewtexas.gov/cab.
No action was taken Thursday night, but the council could act at its Jan. 28 meeting.
District 4 Councilwoman Kristen Ishihara described payday lending and car title loan businesses as "predatory" and perpetuating a vicious cycle of poverty that victimizes residents in dire financial need.
"I personally know of many people that have been put into financial crisis by the loans they've received from a payday lender," she said, adding that these types of companies have a direct correlation to the growth of poverty and even crime in the communities they are found.
Looking at the issue as an attorney, Ishihara said payday lenders have used a loophole in the Texas Constitution to broker loans from banks while acting as a middleman that charges customers increasing fees for this service.
"If I'm asking for $300 because I can't make it to my next paycheck, and the lender is charging $100 on top of that loan ... very quickly it turns into owing much more than the original amount borrowed," she said.
Opponents of the ordinance included Longview residents who own or work in these businesses who attacked the proposed ordinance as governmental overreach that threatens their livelihood. Each said they provide lower-income residents — many with poor credit and nowhere else to turn — a quick way to get emergency funds.
David Lawrence of Texas Title Pro said that if the ordinance passes as written, it would effectively put companies such as his out of business.
"When that happens, these people are still going to need these loans. That need is not going to just go away. Many will have to resort to online loans," he said, adding that he would provide council members and city staff with a comparison of rates found online compared to his.
"It's double, sometimes even triple my fees. As a result, there's going to be that many more people in an even worse bind," Lawrence said.
J. Pruett of Texas Star Title and Loans rejected the idea that companies such as his are out to ruin their customers.
"We don't want people to get into this trap you're talking about," he said. "It doesn't help us at all. We want people to borrow money, pay it back and build a relationship to where — when they do need some help — they come and see us."
Mayor Andy Mack said the purpose of presenting the information was to allow different perspectives to be voiced before the city proceeds on the ordinance.
"Like any issue that affects the people of Longview, if we don't first discuss it, we can't decide on it," he said. "We had some good discussion tonight, and I look forward to continuing to talk about this issue."
Mack also urged caution from council members to make sure the city does not overstep its bounds.
"If the city gets involved in regulating this industry, where does it stop?" he asked. "The city is not in the business of regulating industries — that is not our position. We want less government, not more."
Rob Norcross, spokesman for the Consumer Service Alliance, said Thursday in an interview before the council meeting that although the loans are small, there are complex policy issues involved.
Norcross said he urges city leaders to first get input from industry experts and perhaps economists with expertise in this field, not just consumer advocates.
"Regulating the operations of a business is not something that cities are built to do. It's one thing to take care of zoning, permits, streets and crime. But for the city to regulate what you can sell, how much of it you can sell and the price you can sell it for is not something cities do in any other area," he said. "I've represented banks, mortgage companies, credit unions and consumer finance companies for 30 years, and this is the most perplexing thing I've been a part of in my career."
Cash America, one of the nation's largest lenders, has closed most stores in cities where these kinds of ordinances are adopted, Norcross said.
A spokeswoman for the company confirmed this Thursday, saying in the past couple years, Cash America has shifted away from payday loans to focus more on the pawn side of its business.