Elected officials in Amarillo, Texas, are tackling the issue of car title and payday loans that charge borrowers interest that can top 500 percent.
There are two main approaches for Texas governments that want to control such businesses: zoning rules to keep them from saturating an area or regulations on how they do business. While dozens of cities in the state reportedly have approved one or both of these options, the courts are still trying to determine their legality. "The business regulation model is gaining more traction," according to Amarillo City Manager Jarrett Atkinson, who explained some of the components of a model ordinance developed by the Texas Municipal League and adopted by several jurisdictions statewide.
Those guidelines include requiring the business to register with the city, limiting the number of times a loan can be renewed, requiring a short term for repayment with payments reducing principal by a minimum of 25 percent per payment, and basing loans on the borrower's ability to repay. "The amount of a payday loan may not exceed 20 percent of the consumer's gross monthly income," according to a summary of the league's draft. "The amount of an auto title loan may not exceed the lesser of 3 percent of the consumer's gross annual income or 70 percent of the retail value of the motor vehicle."
To explore their options, Amarillo city council members are planning a workshop to learn more about the problem. Banks as well as consumer and other organizations will be invited to participate in the event.