A new city ordinance to govern payday and title loan businesses might be for naught as a bill related to those sorts of businesses makes its way through the legislative process.
A revised version of Senate Bill 1247, filed by Sen. John Carona, R-Dallas, to change how short-term loan companies operate and cities’ power to control them has made it through committee and next heads to the full Legislature.
“I am pleased that the Senate Committee on Business and Commerce favorably reported a revised committee substitute to the Senate for SB 1247,” Carona wrote in a prepared statement. “The revised committee substitute incorporates the feedback we received from multiple stakeholders after our previous hearing, including city officials and consumer advocacy groups. With the input of these stakeholders, we were able to craft the current committee substitute, which represents a more robust, consumer-protection-driven bill that will provide real safeguards against the cycle of debt.”
Carona said the Office of Consumer Credit Commissioner estimates that legislation could save consumers between $132 million and $220 million annually based on the refinance limitations alone.
Included in the committee revisions were mandates for a consumer to have only one payday loan and one auto title loan at a time. Loans could not exceed 6 to 8 percent of the consumer’s gross annual income for single-payment auto title loans. Also, the bill would limit the number of times a single-payment auto title loans may be refinanced to six before the loan company must offer the person an extended payment plan before initiating any repossession activities. The last provision listed was the pre-emption of local ordinances, though it left city zoning alone.
In a prepared statement, the Consumer Service Alliance of Texas called the bill’s passage out of the committee a bit of progress.
“In response to the urging of leaders in the Texas Legislature and our reluctant legal disputes with certain cities about the terms of ordinances, our member companies implemented new operational guidelines in October of last year to address important cycle of debt issues,” the statement read.
Pat Smith, a board member of the United Way of Denton County and a staff member at Denton Bible Church, said that while the bill still has some of the provisions that the consumer advocates hoped for, it’s still watered down from the original bill. It also still has language in it that would eliminate the city’s authority to police payday lenders and title loan companies, he said.
Smith said he will continue to encourage people to write their representatives on this issue and voice their opinion.
“It is really going to take a grass-roots effort for voters to tell legislators we need to do a better job of protecting the more vulnerable members of the community,” he said.
Denton Assistant City Manager John Cabrales said city officials are continuing to coordinate regulatory efforts with the Texas Municipal League along with other cities that have passed ordinances, such as Dallas and El Paso.
“[The bill] still has a long way to go,” he said. “Along the way, if it gets changed, it could end up dying somewhere. I don’t know what the appetite is at the Legislature to pass anything. If this bill passes, it will have a definite negative impact on the [regulatory] ordinance passed by the city of Denton.”
BJ LEWIS can be reached at 940-566-6875 and via Twitter at @BjlewisDRC.