Focus on lenders back at local level

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Group urges uniform ordinances to regulate predatory practices

By the end of this month, the Texas Municipal League plans to have a sample ordinance ready for Texas cities that want to restrict predatory lenders in their communities.

State Rep. Mike Villarreal, D-San Antonio, hinted at his intentions during a press conference earlier this year that he would work with Texas cities to restrict predatory lenders when it became clear that meaningful reform of “credit access businesses,” as they are known legally, would not pass the Legislature this year.

The Texas Municipal League is a nonprofit association that helps cities with their educational, legal and legislative efforts. Bennett Sandlin, the league’s executive director, confirmed this week that it is working with Villarreal on the resources smaller Texas cities would need to respond to the problem of certain payday, title and other predatory lenders in their community.

That help would include offering not only the sample ordinance but also a clearinghouse for municipal attorneys to help them defend it, he said.

The league is not advocating for the local legislation, Sandlin said. Even though a lot of cities don’t like the businesses and their impact, some cities welcome the business and others are in between those two opinions. But for those cities that want to restrict the businesses, the league will ask that cities adopt ordinances as uniformly as possible.

“We don’t normally do this,” Sandlin said. “We hope cities don’t go all over the map on this.”

Usually, the league encourages cities to adapt sample ordinances to fit local conditions. Part of the reasoning for seeking some uniformity is to help quell criticism that different rules in different cities make it too difficult to do business and comply with local laws, he said.

“They [the lending industry] are just champing to say that so many cities are doing this that they need pre-emption from the Legislature,” Sandlin said.

Thus, even though the league is not advocating that cities adopt the rules, the league is continuing to advocate for cities to retain local control, he said.

Denton officials welcomed the news of the league’s help.

In March, the city adopted an ordinance restricting predatory lenders. Denton’s ordinance is similar to those passed recently in Austin, El Paso, Dallas and San Antonio.

Denton modeled its ordinance after the one adopted in Dallas, which withstood a legal challenge from the Consumer Service Alliance of Texas earlier this year. The alliance sued Denton in April. Although the alliance sought an injunction against enforcing the ordinance with its original filing petition, court records show there has yet to be a hearing scheduled on the matter.

Denton City Council member Kevin Roden said a group of local officials from banks, social service agencies and the city have been meeting to discuss ways not only to build regional awareness of the problems around predatory lending but also to try to address them.

“I’m happy to hear that TML is doing this,” Roden said. “We’ve been heading in that direction.”

Through BankOn Denton, local officials have already started reaching out to other cities in the area, Roden said. Some area banks have signed on to a program spearheaded by the United Way of Denton County. The program aims to help people who don’t use banks or are not able to access all the financial services they need, and thus end up using more costly services, such as check-cashing and payday and title lending. The program provides participants both financial education and referrals and is expected to be launched this fall.

In addition to reaching directly to Little Elm, Sanger and Lewisville, Roden said, local leaders hope the issue can be discussed by other city managers in the area, particularly those that have branches of participating banks. City leaders nearby may not know that some Denton payday and title lenders and customers have been moved to their city since the ordinance was passed.

Since area city managers do get together from time to time and discuss matters of mutual interest, Denton City Manager George Campbell plans to poll the others soon and see where they stand on the topic, he said.

Until this week, the early plan was to talk about bringing the banking program to other communities, but now a sample ordinance from the Texas Municipal League could be part of that discussion, too.

“It would be good having it in hand for that meeting,” Campbell said.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.


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