New alliance calls for tougher restrictions on payday and title lending
A new alliance of residents and community groups wants to see tougher local restrictions on payday and title lending in Denton in the coming year.
Representatives from churches, nonprofit groups and a local credit union identified themselves as Denton for Fair Lending and tag-teamed a presentation during the Denton City Council’s regular meeting Dec. 18. In front of a full house of residents waiting to speak on other issues, including the smoking ban and gas drilling regulations, six people took about 20 minutes to lay out facts, figures and stories of how payday and title lending practices have affected Denton residents.
At the end, they asked the council for tougher ordinances, restricting the business in ways similar to new rules adopted in the past 18 months in Dallas, Austin and San Antonio.
About 45 various Denton businesses are making such short-term loans, including 28 payday and title lenders, according to U.S. Department of Labor statistics. When Dallas passed its ordinance in May 2011, that city had one payday or title lender for every 6,100 residents, many in southern Dallas. Currently, Denton has one payday or title lender for every 4,200 residents.
Most of Denton’s payday and title lenders are clustered along Carroll Boulevard, Loop 288 and University Drive, making the U.S. Highway 380 corridor look blighted, according to Joe Ader, resident and pastor of the Village Church.
Ader told the City Council that Denton’s payday and title lenders stripped about $2.6 million in wealth from the city in the past year. In addition, at least 66 cars were repossessed in Denton by title lenders last year, Ader said.
Payday and title lenders require borrowers to pay the principle and interest back all at once, rather than in payments. When borrowers are unable to repay, the entire loan is rolled over and continues to build interest. Many states have made such lending illegal, but Texas allows the lenders to operate as credit service organizations — essentially in the same category as nonprofit groups that work to help people rebuild credit.
“That loophole allows them to operate,” Ader said. “And they are targeting the most vulnerable in our community — those in poverty, the elderly and college students.”
Resident Janet Shelton of Hope Inc. told the council that the average $300 payday or title loan costs the borrower about $840 to repay. Because Hope Inc. provides cash assistance to pay bills, the agency is helping families caught in such financial traps.
She told the story of a friend, a retired teacher, who borrowed $1,000 to help her grandson with legal fees, and had gone months paying $200 a month, without ever having any of her payments apply to the principal.
“What value does society, or Texas, gain from allowing usury to exist, even if it goes by another name?” Shelton asked.
Michael Pirtle of Vision Ministries said it has also seen an increased number of people coming to the group asking for help because they became entangled with a payday or title loan.
He told the story of an elderly woman the organization was asked to help. The widow of a World War II veteran had been frugal her whole life, but borrowed $75 in June 2008 and was never able to pay more than the fees. Principal and interest continued to roll over into new loans until the amount, $650, required she put up the title to her 1995 Buick. By December 2011, she had paid more than $5,600 in fees, but still owed for the original loan. Her family came to her rescue, but not until after the woman also incurred more than $4,000 in overdraft fees from her bank and was hospitalized from the stress.
“The woman was financially consumed,” Pirtle said, adding, “Stories like these drain our budgets and that of the other nonprofits we work with.”
Melanie Vest of DATCU said the credit union is working with Denton nonprofits to determine how much has been spent helping residents dig out from payday and title loans since that aggregate figure for Denton is not known. However, she told the council that Catholic Social Services in Tarrant County paid out $800,000 last year to bail out families entrapped in the debt cycle.
Resident Leah Jordan of the United Way of Denton County reminded the council that one in five residents live at or below the poverty level, and that one in three students in the Denton school district comes from a home that is economically disadvantaged.
“We are concerned any time our low-income residents are targeted with costly services when there are more cost-efficient services available,” Jordan said.
The United Way has partnered with the Texas AgriLife Extension Office, other community groups and financial professionals to help educate and empower consumers on budgeting and debt management, Jordan said.
However, the city needs to do more, Kayce Strader told the council.
“Nonprofits are doing all they can to pull people out of the river, but somebody needs to walk upstream,” Strader said.
Strader asked the council that the city add new predatory lending laws to its lobbying agenda, which the council had done earlier in the day. She also asked the council to adopt an ordinance similar to those adopted in Dallas, Austin and San Antonio. The ordinances contain a number of restrictions, including rules that govern where the businesses can be located and how they work with their borrowers.
Currently, such businesses are allowed in any retail zone in Denton. Other cities have restricted the businesses to certain zoning. The group also asked that the ordinance require short-term loans be set up for repayment in four installments.
An alliance of payday lenders, the Consumer Service Alliance of Texas, has sued Dallas and Austin over their ordinances, but has not, to date, filed against San Antonio.
The group believes the ordinances conflict with state law, according to Jill Hillrichs, of the alliance.
Such ordinances also restrict “consumer access to short-term credit and will likely force some borrowers into higher cost alternatives,” Hillrichs wrote in an e-mail.
At the end of the presentation, Mayor Pro Tem Pete Kamp asked what would be the next step for the city. City Attorney Anita Burgess said the legal department was already researching the matter and would bring something back for discussion soon.
The matter has yet to be scheduled.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is firstname.lastname@example.org .