Costly Cash: In Texas, Towns Try Zoning Out Payday Lenders

DailyFinance
March 10, 2010
Gogoi, Pallavi

In December, Brownsville, Texas began enforcing a six-month moratorium blocking payday lenders from opening any new stores in the town. It joined at least half a dozen other towns and cities in the effort to curb abuses from these lenders in the absence of statewide legislation. The Texas constitution considers interest rates over 10 percent usurious, and the Texas Consumer Credit Commissioner sets interest rates caps of about 18 percent; but payday lenders in the state, which is a power center for the industry, found a loophole and began registering themselves as "credit service organizations." Such organizations can operate freely just by paying a $100 application fee to register themselves. Ann Baddour, a senior policy analyst at Texas Appleseed, said, "There's no political will in Texas to do anything about it. Bills are buried or delayed to a point where they never get to a vote." As a result, cities have resorted to the zoning ordinances in protest to both the predatory lending industry and the state legislature.
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