Reaction was mixed, though it appears likely there is enough support to pass.
The proposed ordinance would limit payday loans to 20 percent of a borrower’s gross monthly income and auto title loans to 3 percent of the borrower’s gross annual income or 70 percent of the car’s value, whichever is less. Single-payment payday loans could be refinanced no more than three times, while multiple-installment loans could include no more than four payments. The principal owed would need to drop by at least 25 percent with each installment or refinancing.
Skeptics on council said the proposal could drive payday lenders outside city limits, hurting borrowers’ access to credit. Councilwoman Melissa Noriega also cautioned against viewing all such lending as nefarious, saying she knows a woman who takes out a title loan each year to buy school supplies.
“It’s very important that we not make life more difficult for poor families while we assume that we’re helping them,” she said. “I’m not saying we’re doing that; I just think that’s one of the key concerns here.”
Noriega’s concerns about what would replace payday lenders were echoed by Councilman Ed Gonzalez, who said he worried about constituents visiting a loan shark at the local cantina, and Councilman Jerry Davis, who said he did not want residents turning to “Good Times” character Lenny, a neighborhood hustler, for credit.
“I don’t know that Lenny the loan shark is much worse than the worst of the payday lenders,” Parker replied.
City Attorney David Feldman added that, while many payday lenders fled Dallas when it adopted its restrictions, the same has not been true in San Antonio.
One thing I want to point out: If you go back and review the Mayor’s proposal, you will note that nowhere in there does it put a limit on the interest rate that these lenders can charge. That means they will still be free to impose a 612% APR on their loans, while claiming they’re just charging 20% and doing their best to obfuscate what it all means. Seriously, go read this account by Forrest Wilder of taking out a “payday loan” that turned out to be a new mutation on the form that was aimed at slipping through the city of Austin’s regulations. That’s what we’re dealing with here. I understand Council’s concerns, but for the most part I don’t share them. I don’t see what’s being proposed here as needless or particularly burdensome. The item will be on Council’s agenda for December 11, which means it will likely be voted on the following week after getting tagged. Texpatriate and Stace have more.