In Dallas, the political atmosphere for payday lending reform is optimistic. After three years of ordinances limiting lending practices, the local movement has spread to 17 other cities across the state. Today, Dallas City Councilman Jerry Allen went before the Amarillo City Council to try and recruit that city to the fight club against loan sharks. "The momentum just continues to gain," Allen told Unfair Park. "After the 2011 session, I realized that the state wasn't really going to do anything so I got back and worked with the city."
And increased limitations can't come quickly enough: Texas has some of the most lax lending laws in the country, with the highest surcharges. There is no cap on lending fees, and some interest rates soar over 600 percent. Moreover, statewide payday lending reform has failed in the Legislature for the past three sessions.
According to Texas Appleseed, Dallas paved the way for metroplex and statewide limits on payday lenders. In 2011, Dallas enacted the first city ordinances in Texas that limited payday and auto title lending. "These ordinances have two purposes," says Brett Merfish of Texas Appleseed. "One is to provide what local relief they can, and the other is to put state lawmakers on notice that there needs to be a statewide solution."
The city ordinances limit how much a person can borrow, how many times their loans can roll over, and list specific land ordinance criteria. Through this, the city can help alleviate the debt that often unendingly piles on when borrowers are faced with sky-high interest rates.
"These payday lending guys, they don't want you to pay the debt off. When you keep renewing, they collect interest and fees," Allen says. "But since the land ordinance there has not been one single new payday lending store in Dallas, Texas."
And the feds are acting in Dallas too. The Consumer Financial Protection Bureau recently fined the Irving-based Ace Cash Express $10 million for its "cycle of debt" practices, and last year fined the Fort Worth-based Cash America $19 million.
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Several other cities in Texas have since followed Dallas' example and passed ordinances of their own. And more could be in order as fear of litigation dissipates. In May, the 5th U.S. Circuit Court of Appeals rejected a suit by local payday lenders that claimed Dallas ordinances violated their business rights. But because Dallas payday lending ordinances cleverly limit payday lending practices, rather than completely shut them down, they were upheld in court.
"Before I left the chambers that day we passed the ordinance, one of the payday lobbyists came up to me and said, 'Councilman, you know we're gonna have to sue you,'" Allen says. "Pardon my French, but I said to them, 'We want to get your ass in a court of public opinion. We'll whip you in a court of law.'"
With this latest ruling, Amarillo could become the next in a steady succession of Texas cities that are adopting the Dallas anti-predatory lending model. And with the 84th Legislature set to ring in on January 13, it could send just the right message.
"I think the mere passage of these ordinances is a statement," Merfish says. "While Councilman Allen's initiatives have been effective, a lot of work has happened from the ground up. It's really a homegrown initiative, and this is evidence of something that is affecting Texas in a very real way."