Ditching Compromise, Parker Pushes Tough Payday Loan Regulations

November 23, 2013
Hispanic Business  
car title lending news

Houston Mayor Annise Parker has thrown out a compromise plan to regulate payday and auto title lenders, instead promoting stricter measures to limit this type of financing. The city council will vote next month on the regulations, modeled on rules passed by other Texas cities that include Dallas, Austin, San Antonio, and El Paso -- although some of these measures have prompted lawsuits by payday lenders.

While the industry had pledged not to sue if Houston passed the compromise proposal negotiated earlier this year, Parker believes Texas cities must send a consistent message to lawmakers, who have not yet passed statewide payday lending restrictions. "This is not about making a reasonable profit," she said. "This is about preying on vulnerable human beings and making an obscene profit." Under the proposed ordinance, payday loans would be limited to 20 percent of a borrower's gross monthly income, down from 35 percent in the compromise proposal; and auto title loans would be capped at 70 percent of the car's value, or 3 percent of the borrower's gross annual income, narrowed 6 percent from the compromise plan. Single-payment payday loans could be refinanced no more than three times; and each installment, refinance, or rollover would need to drop the principal owed by at least 25 percent. Under the compromise proposal, the balance would have been required to fall by only 5 percent under those circumstances. In the 10-county Houston region, where about one-fourth of the 3,400 payday lenders in Texas are located, data show that payday borrowers refinance more and pay on time less than state averages.

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