Bellaire has become the most recent Texas city to regulate payday lending in response inaction by state lawmakers on the issue. In doing so, it follows in the footsteps of such cities as Houston, Dallas, Austin, San Antonio, El Paso, and West University Place.
Bellaire's ordinance -- which passed unanimously in February -- requires payday lenders to register with the city and maintain adequate written records for each loan, caps payday loans at 20 percent of the borrower's gross monthly income, caps auto title loans at 70 percent of the vehicle's value or 3 percent of the borrower's annual gross income, and imposes fines up to $500 per offense. Like Houston's law, it requires payday lenders to provide a form that notifies consumers of nonprofit agencies that offer financial education and training programs and agencies with cash assistance programs.
Moreover, the law aims to reduce "the likelihood of borrowers becoming trapped in a cycle of debt." It prevents loans structured for lump-sum repayment from being refinanced more than three times, bars more than four payments for multiple installment loans, and requires the loan's principal balance to be reduced by 25 percent with each refinance or rollover.