City Lists Rules for Payday Lenders But Wants Lawmakers to Act
February 5, 2013
Proposed restrictions on payday and auto title lenders in Houston have garnered mild industry support and disappointment from consumer advocates who say the rules do not go far enough. City leaders say they will hold off on a vote on the proposal until they know if the state Legislature plans to act on payday lending during its current session. The local proposal would cap payday loans at 35 percent of the borrower's gross monthly income for single-payment deals. In the case of multiple-payment loans, each installment would be capped at 25 percent of monthly income. Auto title loans would not be allowed to exceed 6 percent of gross annual income or 70 percent of the car's value, whichever is less. Refinancing on multiple-payment loans would be banned. Critics say that allowing unlimited installments on multiple-payment deals is troubling, since such a deal could contain the fees associated with 10 to 12 rollovers of a typical single-payment deal. "The payday lenders are not likely to sue on this ordinance because it really doesn't hurt very much," according to Mark Wawro of Texas Appleseed. "It doesn't address the cycle of debt. We want to see real change." Activists prefer the models adopted by Dallas and other cities, which limit the number of installments in multiple-payment deals, require a reduction of the principal loan amount by 25 percent with each refinancing, allow for fewer refinancings, and set the caps lower.
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