Fort Worth is the only major city in Texas that has not yet passed an ordinance to restrict payday lenders, but city leaders are reexamining the issue. City Manager Tom Higgins recently released a report for council members, noting that many cities that have enacted regulations have been sued by a payday lending trade group. Cities chose to issue rules limiting the high-interest, short-term loans after state lawmakers failed to do so last year.
Higgins' report, issued May 6, advised against taking immediate action. Instead, it recommended that Fort Worth authorities monitor the lawsuits against San Antonio and Dallas. Fort Worth is the home base for Cash America -- one of the country’s biggest payday lenders -- and large competitors such as Cash First and ACE Cash Express are based nearby. Fort Worth Mayor Betsy Price, who has criticized payday loans' high interest rates, also called for caution on interfering with market-driven activity. Instead, she recommended improved financial education for consumers.
A model ordinance designed by the Texas Municipal League does not cap interest rates but instead limits the loans to 20 percent of a borrower’s gross monthly income. It also forbids auto title loans from exceeding 3 percent of a consumer’s gross annual income or 70 percent of the vehicle’s retail value. Each refinancing or renewal also must repay at least 25 percent of the principal, and lenders must be registered with the city. Higgins recommended that Fort Worth use this example ordinance, but not enforce it until the lawsuits are resolved.
The Consumer Alliance Service of Texas is the industry group behind most of the suits that challenge the city ordinances. A judge has already dismissed the case against Dallas, which argued that it has not enforced the ordinance; but the alliance has appealed.