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Chron overview of HD135

One more look at a local legislative race.

Rep. Gary Elkins

Rep. Gary Elkins

Novice political candidate Jesse A. Ybañez believes his focus on the people of the increasingly diverse Texas House District 135 makes him a better choice than longtime state Rep. Gary Elkins.

Ybañez, 70, is the Democratic candidate in the Nov. 8 general election challenging the incumbent to represent parts of northwest Harris County, including Jersey Village and subdivisions near the intersections of U.S. 290 with Texas 6 and Beltway 8.

The retiree said he was urged to run because of his experience as a volunteer in political organizations and community causes.

“We need to fix a lot of things in Austin,” Ybañez said. “If I win, I can be the voice of the people.”

[…]

Jesse Ybanez

Jesse Ybanez

Ybañez named education, health care, immigration, the environment and human trafficking as his priorities, if elected.

He said he would fight to restore some of the $5 billion in education funding cut during the 2011 legislative session and try to override the Republican firewall that has rejected calls to expand Medicaid under the Affordable Care Act.

Ybañez said the 287(g) program, in which local jailers identify inmates in this country illegally for transfer to federal Immigration and Customs Enforcement, “criminalizes immigrants” who are “doing work that people from the United States don’t want to do.”

Ybañez, who ran unopposed in the Democratic primary, also would advocate for tougher regulations on industrial plants and support efforts to help people trapped in modern-day slavery or the forced sex trade.

Texas 135 is a district where voters chose Republican candidates in federal, statewide and local races two-to-one in 2014. They have sent Elkins back to Austin every two years for the last two decades.

Still, the first-time politician thinks a Democrat can claim the seat, depending on turnout among more diverse voters.

“When I first got here, this was pretty much a Republican area. We’ve had a lot of people come in from New York and California and Florida and we have a lot of African-Americans and Latinos who are more likely to vote Democrat,” said Ybañez, who has been block-walking since June. “I think I have a reasonable chance of winning.”

There are two reasons why I’m interested in this particular race. One is because incumbent Rep. Gary Elkins is so bad, beginning with but hardly being limited to his unwavering defense of payday lenders, a group to which he himself belongs. Some legislators recuse themselves from debates and votes on bills that directly affect them. Gary Elkins is not one of those legislators.

The other reason is that HD135 is one of two Harris County districts that were won by Republicans in 2012 that were less Republican that year than they were in 2008 (HD132 is the other, but sadly no Democrat is running there this year). John McCain beat Barack Obama there 60.6% to 38.7% in 2008, but Mitt Romney only carried it 58.8% to 39.8% in 2012. I’ve been waiting to see what would happen there this year ever since. Even with the Trump effect I don’t think we can quite call this district competitive, but it’s definitely the case that it’s more so than before. No matter what happens this year, HD135 needs to be on the radar going forward.

Appeals court blocks litigation against payday lenders

Lousy.

BagOfMoney

The Fourth Court of Appeals in San Antonio derailed a class action lawsuit aimed at keeping payday lenders from using the state’s criminal justice system as de facto collection agencies.

The suit filed by 1,400 plaintiffs argued that Cash Biz, a payday lender, illegally used district attorney offices to file criminal charges against debtors. Under the ruling, the plaintiffs will now have to settle their disputes with the firm through individual arbitration.

“This is a devastating opinion,” Daniel Dutko, attorney for the plaintiffs, said in an interview with the Observer. “[It] basically means that payday loan companies can do anything they want and send the cases to individual arbitration where nothing bad will happen except maybe a slap on the wrist.”

In 2013, the Observer was the first to report that Cash Biz and other payday lenders, in violation of state law, were using courts and prosecutors to extract payment from their customers by wrongfully filing criminal charges against them for writing “hot (illegal) checks.”

Under Texas state law, writing a post-dated check to a lender that bounces is not the same as writing an illegal check. When post-dated checks bounce, lenders are supposed to negotiate payment with customers. In fact, state laws forbid payday loan companies from even threatening to pursue criminal charges against their customers, except in unusual circumstances.

But the Observer investigation found at least 1,700 instances in which Texas payday loan companies filed criminal complaints against customers in San Antonio, Houston and Amarillo. In at least a few cases, people landed in jail because they owed money to a payday loan company.

A copy of the opinion is here. I Am Not A Lawyer, so maybe there’s some sound legal reason for this, but on its face it sounds terrible. Forced arbitration clauses are a racket, and even the idea of jailing someone for owing money to a payday loan company is repugnant. If I thought there was a chance the Legislature might address this, I’d be less concerned, but despite bipartisan support for statewide regulations on payday lenders, nothing has happened and nothing is likely to. This just sucks.

By the way, since I have mentioned the appeals court races as an underappreciated target for Democrats this November, I will note that the judge who wrote the majority opinion, a 2015 appointee by Greg Abbott to the 4th Court of Appeals, is on the ballot in Bexar and other counties. The dissenting judge was one of three Democrats (out of five races total) to be elected in 2012. Like I said, opportunities.

Bring back postal banking

I still like this idea.

Postal unions and civil rights groups are among other advocacy organizations, along with the U.S. Postal Service inspector general, pushing USPS to expand into banking. Sen. Bernie Sanders (I-Vt.), a Democratic presidential hopeful, agrees. But USPS, which could use the business, has no interest.

Providing financial services in post offices “could benefit the 68 million underserved Americans who either do not have a bank account or rely on expensive services like payday lending and check cashing,” says an inspector general report issued in May. “The products also could help the Postal Service generate new revenue to continue providing universal service. Because it has a presence in every neighborhood, including many places where there are no longer any bank branches, the Postal Service is well suited to provide such services. In addition, its well-trained workforce is already experienced at handling complex transactions and watching out for related fraud and other risks.”

The push for postal banking received a boost this month with an article by Mehrsa Baradaran in The Atlantic. Baradaran, a University of Georgia School of Law associate professor, advocates a “central bank for the poor,” as an alternative to “the unscrupulous practices of payday lenders.”

Postal banking, she wrote, could provide short-term loans and “potentially drive out the usurious fringe-lending sector, which profits from Americans’ financial woes.” Her article was adapted from her book “How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy.”

USPS officials regularly trumpet what they are doing to improve the Postal Service’s financial situation, including such things as selling greeting cards. But the officials have rejected postal banking.

“While we currently provide our customers with certain financial services, including money orders, electronic funds transfers, and cashing of U.S. Treasury checks, our core function is not banking,” said David A. Partenheimer, a USPS spokesman. Former Postmaster General Patrick Donahoe was more emphatic during his farewell press conference in January. “The key thing for any successful business is to work within their core,” he said. “We don’t know anything about banking.”

They must have forgotten.

Postal banking, known as the Postal Savings System, began operation in 1911 and officially ended in 1967, though the Post Office stopped accepting deposits a year earlier. Initially, savings earned 2.5 percent interest with a half-percent designated for operation of the system, according to a postal service history. “Although bankers first viewed the Postal Savings System as competition,” the history says, “they later were convinced that the Postal Savings System brought a considerable amount of money out of hiding from mattresses and cookie jars.” Most of the money was redeposited in local banks. The Postal Savings System, however, did not include lending, according to Mehrsa.

I’ve covered this before, and continue to be convinced that it makes sense. That Inspector general report quote above is a big part of it, but just having convenient access to their money without having to pay exorbitant fees or be at the mercy of the failings of unregulated “entrepreneurs” would be a huge book for millions of working people. I truly don’t understand the USPS’s objections to this, given their own history. It would be good for their business as well as good for so many people. Keep up the pressure, y’all.

Here come those CFPB payday lending regulations

An update from the AP.

Troubled by consumer complaints and loopholes in state laws, federal regulators are putting together the first rules on payday loans aimed at helping cash-strapped borrowers avoid falling into a cycle of high-rate debt.

The Consumer Financial Protection Bureau says state laws governing the $46 billion payday lending industry often fall short, and that fuller disclosures of the interest and fees — often an annual percentage rate of 300 percent or more — may be needed.

Full details of the proposed rules, expected early this year, would mark the first time the agency has used the authority it was given under the 2010 Dodd-Frank law to regulate payday loans. In recent months, it has tried to step up enforcement, including a $10 million settlement with ACE Cash Express after accusing the payday lender of harassing borrowers to collect debts and take out multiple loans.

[…]

The agency is considering options that include establishing tighter rules to ensure a consumer has the ability to repay. That could mean requiring credit checks, placing caps on the number of times a borrower can draw credit or finding ways to encourage states or lenders to lower rates.

See here and here for the background, and ACE Cash Express settlement. Given the efforts by some legislators – backed up by Greg Abbott – to destroy local control, I feel confident that no matter what the CFPB proposes, no matter how reasonable or milquetoasty, will be met by at least one bill filed to nullify it. It’s just how we roll around here.

2015 Mayoral manifesto: Quality of life and other issues

Preliminaries
Transportation
Public safety

A few quick hits on topics that didn’t fit elsewhere.

Making Houston affordable again

Remember when Houston was an inexpensive place to live? If you haven’t been here at least a decade – more like two decades, for some neighborhoods – you probably don’t. The transformation of so many parts of Houston, especially the Inner Loop, has been a big positive in many ways, but it’s come with a big price tag. Many longtime residents of many established and historic areas have been forced out, and the vast majority of housing construction today is high end. Houston’s longstanding reputation as an affordable place to live is no longer valid, and it’s having an effect. If nothing else, you have to wonder what will happen to some of these luxury apartment/condo complexes if the price of oil stays down around $50 a barrel. Mayors of course are limited in what they can do about this sort of thing, but there are some good policy ideas to encourage affordable housing development out there. I’d at least like to know that the Mayoral candidates consider this to be something worth thinking and talking about.

Historic preservation

In 2010, City Council passed a historic preservation ordinance, after a lot of work, debate, and contentiousness. Four years later, that ordinance is still a work in progress, with tweaks being made to help developers and homeowners better understand what it means and how to follow it. What sorts of “tweaks” would the Mayoral candidates like to see made to this ordinance? More broadly, and as a tangent to the point about how many established neighborhoods have been transformed by the recent real estate boom, what can – or should – be done to protect the interests of longtime residents in these neighborhoods and the houses that gave them their character in the first place? How do you balance their interests with those of developers?

One Bin For All

I trust everyone is familiar with the One Bin For All proposal. Last year, the city received numerous RFPs to build the kind of all-in-one plant that would revolutionize solid waste management and forever put to rest Houston’s abysmally low recycling rate. At this point, we don’t know where that stands, and while Mayor Parker and Sustainability Director Laura Spanjian have steadfastly advocated for this idea, they have also said that if it isn’t feasible then the city won’t pursue it. Many environmental groups – though not all – have been critical of the One Bin plan, preferring that the city do more to expand single-stream recycling. This is a big decision that Mayor Parker and City Council will eventually make. What direction do the Mayoral candidates want them to go? Who likes the One Bin idea, and who is skeptical of it? For those in the latter group, what would they do to increase recycling in Houston? If One Bin isn’t the answer, what steps can the city take beyond encouraging recycling – such as reducing the amount of food waste being sent to landfills – to do better and spend less on garbage?

State versus city

I discussed the threat of so-called “sanctuary cities” legislation in the Public Safety entry, but that is far from the only bill that seeks to limit or dictate what cities like Houston would be allowed to do by the Legislature. From payday lending to equal rights ordinances to plastic bags to who knows what else, the Lege – egged on by Governor Abbott – has declared war on local control. Are any of the Mayoral candidates – other than Rep. Sylvester Turner, who can safely be assumed to be dealing directly with these issues – even thinking about this stuff? Because if they wait until the voters are presumed to be tuning in, it will be too late. We need to be hearing from these guys now. If they don’t like some of the items on the Legislature’s to do list, they need to say so now. If they do like these things, then we need to hear them say that, too. Either way, now is not the time to be silent. If any of these bills pass, it will have a profound effect on Houston. The next Mayor of Houston might want to get out in front of that.

I could go on, but I think that will do for now. I realize this is a long campaign, and I realize the average voter is assumed to have the attention span of a gnat. I also realize that some of these candidates don’t have fully fleshed-out positions on everything yet, though let’s be honest here – most of the declared candidates – three of whom so far are repeat customers – have been running for Mayor for many years now. They’ve just made it official now that they can raise money. They’ve all got advisers and consultants and political directors and what have you out the wazoo. Let’s put some of that brainpower to the test. Anyone can be against potholes. I want to know what these guys are for, and it’s neither unfair nor too early to start asking where they stand, at least in general, on these issues. I hope you’ll join me on that, and will do the same for the issues that are important to you.

Interview with Diego Bernal

Diego Bernal

Diego Bernal

For the second biennium in a row, there are legislative special elections going on during what many of us think of as the Christmas break. That’s not so great for the people involved in those campaigns, since it’s hardly a break for them, but at least it’s convenient for me to schedule some interviews. I’m going to bring you a few interviews with candidates running in these special elections, for which early voting has now begun. First up will be Diego Bernal, who recently resigned his seat on San Antonio City Council to run for the HD123 position that was vacated by Mayoral candidate Mike Villarreal. Bernal, a native San Antonian, was a social worker and civil rights attorney before his election to Council. I first became aware of Diego Bernal back in 2012 when he led the fight to pass stricter regulations on payday lenders, thus helping to set a model for other cities like Houston to adopt. He was also a key supporter of expanding San Antonio’s non-discrimination ordinance to include LGBT folks. Those were among the topics we covered in the interview:

I should have interviews with candidates from other races the rest of this week.

How much do payday lenders suck?

This much.

paydayloanssized-712x475

Pursuing, or even threatening, criminal charges against payday and title borrowers is strictly prohibited by Texas law, with very few exceptions. The Texas Constitution unequivocally states, “No person shall ever be imprisoned for debt.”

But new research released this morning by Texas Appleseed shows that criminal charges against payday borrowers for missing payments is common in Texas. Texas Appleseed documents more than 1,500 criminal complaints of bad check and theft by check allegations filed by payday loan companies in Texas between 2012 and the spring of this year. Many of them resulted in fines, arrest warrants and even jail time.

The research builds on reporting by the Observer published in July 2013, which found 1,700 instances in which payday lenders in Texas have filed criminal complaints against customers. The Observer story prompted an ongoing investigation by the state Office of Consumer Credit Commissioner, which regulates the industry in Texas, into one payday loan business, Cash Biz. It also led regulators to issue an advisory bulletin to lenders warning them to stop pursuing criminal charges against their customers.

Texas Appleseed found 13 different payday loan companies pursuing criminal charges in eight different counties, including Travis, Dallas, Harris and Collin. Texas Appleseed filed a complaint today with the federal Consumer Financial Protection Bureau, the Federal Trade Commission, the Texas Attorney General’s Office and the state Office of Consumer Credit Commissioner. The complaint letter, which includes 700 pages of supporting documentation calls for state and federal authorities to launch an investigation and take enforcement action against lenders abusing the law and their customers.

“In addition to their outrageous rates and lending practices, payday loan businesses are illegally using the criminal justice system to coerce repayment form borrowers,” said Ann Baddour of Texas Appleseed. “This directly contravenes state and federal law, which eliminated debtor’s prisons long ago.”

In one justice of the peace court in Harris County, the group found that arrest warrants were issued in more than 42 percent of the cases and at least six people served jail time. In Collin County, there were 740 documented criminal cases against payday borrowers—636 from a single lender, PLS Loan Store—and $132,000 collected from borrowers.

Go read the whole thing, and read that Observer story from last year that I managed to overlook at the time. I don’t know about you, but I don’t want my county’s law enforcement apparatus acting as a debt collector for private companies. Here’s the Texas Appleseed press release and the complaint they filed, which lists all the offenders. Consider this your pre-session reminder of why we need state regulation of these shysters. I don’t know what any of the offices that received these complaints can do about it, but I would suggest that boiling them in their own pudding and burying them with a stake of holly through their heart would be poetically just, if perhaps not quite constitutional.

Diego Bernal to run for HD123

Good.

Diego Bernal

Diego Bernal, a civil rights attorney elected to the District 1 City Council seat in 2011, will leave the office on Tuesday to run in a yet-to-be-called special election for the Texas House of Representatives.

“I’m stepping down,” Bernal told the San Antonio Express-News, “because there’s going to be a vacancy in House District 123.”

Bernal, a Democrat, has his sights set on replacing Rep. Mike Villarreal, D-San Antonio, whose 123rd district overlaps with Bernal’s council district.

Villarreal has sent a letter to Gov. Rick Perry saying he intends to complete his current term, which ends Jan. 13, but does not intend to serve in the 2015 term, to which he was elected on Nov. 4.

[…]

Bernal leaves a significant legacy in his nearly two full terms on council.

He spearheaded city policy that cracked down on payday lenders and was the driving force behind the city’s bolstered nondiscrimination ordinance, which now offers protection to people based on their sexual orientation and gender identity.

The nondiscrimination ordinance was easily the most controversial issue the council faced.

He also said he’s proud of the transparency in his office, his open-door policy and communications with District 1 constituents.

Bernal also was a staunch advocate for the inner city.

“I’m proud that we demonstrated that you can start to bring attention to areas that had not seen it in decades,” he said.

But for every mended street, every new sidewalk, there are miles more left unattended.

“If you take your job seriously,” he said, “you’re haunted by what you haven’t gotten to.”

All of that makes me a big fan of CM Bernal and has me excited for the prospect of having him in the Legislature. He has exactly the right attitude for the job. We could use a lot more like him.

Bernal won’t be unopposed in this not-yet-declared special election, of course, so let’s not get too far ahead of ourselves. The Trib introduces another hopeful for HD123:

San Antonio City Councilman Diego Bernal and public relations consultant Melissa Aguillon have both set their sights on Villarreal’s House seat, which covers downtown and parts of northern San Antonio. Villarreal announced last week that he would resign his seat in the next Legislature in order to focus on running for mayor and give voters time to fill his seat ahead of the upcoming session. State Sen. Leticia Van de Putte, D-San Antonio, who just lost her bid for lieutenant governor, is also said to be considering a mayoral run.

Aguillon said she decided to pursue the seat earlier this summer when it became clear that Villarreal would step down from the House.

“When I first heard that Mike was going to be running for mayor, I just decided that this was something that I wanted to do,” Aguillon said. “I’ll use my experience that I’ve already had as a small business owner and put it to work as hopefully a representative for the district.”

Before starting her marketing firm, Aguillon worked for the city’s economic development department. She also worked for state Rep. José Menéndez during his time on the San Antonio City Council. Menéndez said earlier this week that he would consider running for Van de Putte’s Senate seat if she too steps down to run for mayor. If that happens, he’s likely to face state Rep. Trey Martinez Fischer, D-San Antonio.

I know nothing more about Ms. Aguillon than that. I’m sure she’d make a fine Representative, but with all due respect Diego Bernal is my first choice. The Rivard Report has more.

Gary Elkins thumbs his nose at local payday lending ordinances

Such a fine example he sets.

Rep. Gary Elkins

As a member of the Texas House of Representatives, Houston Republican Gary Elkins helps make laws. As a businessman, he is an owner of a chain of payday lending stores accused of breaking them.

Elkins opposed payday lending regulations during the 2011 and 2013 legislative sessions, arguing members should defer to his expertise and calling the bills a solution in search of a problem. Efforts at comprehensive statewide reform failed, leading Texas’ three largest cities to adopt their own restrictions on the products payday and auto title lenders can offer.

As the local ordinances have come into force, first in Dallas, then San Antonio and, as of this summer, Houston, Elkins’ Power Finance locations or store employees in all three cities have received citations, accused of ignoring the law by not registering with the cities or allowing regulators to inspect their books.

Elkins’ interests in San Antonio were among the plaintiffs who sued the city of San Antonio over its payday regulations; the case was dismissed last February. The same attorney who represented the lenders in that case, John Dwyre of San Antonio, directed Houston officials in a Sept. 10 letter obtained by the Houston Chronicle not to speak with, ask for identification or request records from Power Finance employees.

Having been blocked from enforcing the ordinance at the firm’s locations, Mayor Annise Parker said, Houston officials now plan to cite Power Finance as a company for failing to comply.

“The city of Houston has worked successfully with Rep. Elkins in other areas, but the fact that he would deliberately flout our local ordinances is not just unfortunate – it sends the wrong signal,” Parker said. “We all understand that the reason that our system of laws works is that people of goodwill voluntarily comply with the law. It undermines the entire system when a public official chooses not to comply with a legally passed law or ordinance.”

[…]

Dallas’ lone Power Finance store in January was issued four citations, three for allegedly violating zoning rules for payday lenders, and one for failing to register with the city. The cases are set for trial next month, said Assistant City Attorney Maureen Milligan.

“Here you have a lawmaker that makes law for everybody else, and then when it comes time for him to follow the law that other people follow, he thumbs his nose at it,” said Dallas City Councilman Jerry Allen, who has championed that city’s regulations. “We’re not going to tolerate it. ”

We should not be surprised by this. Elkins took the lead in fending off payday lending bills in the 2013 Legislature, and has zero shame about it. I don’t quite understand why there hasn’t been an ethics issue relating to this – Sen. Leticia Van de Putte had to sell her pharmacy shortly after being elected in order to avoid a potential conflict of interest, yet there’s Elkins up at the mike pushing his own business interests. It’s nothing new, either. Here’s an excerpt from the Texas Monthly Ten Worst Legislators list from 2001:

In the legislative pond, Gary Elkins is a minnow. he feeds in the shallows, far from the dangerous waters of floor debate and important bills. He’s such a small fish that he escaped the Worst list in 1999 with a onetime catch-and-release exemption—even though no less than the Wall Street Journal had documented his efforts to help the small-loan industry, in which he makes his living (“Legislator’s Slim Agenda Mirrors His Private Interests”). So what does Elkins do this session? He swallows the hook again. Exemption expired.

Elkins’ livelihood is the controversial sale-leaseback business, in which customers, usually low-income, get cash for a household item, which they retain, and pay stiff regular fees until they can repurchase it. The industry claims that these transactions are leases, not loans, and that the fees are not interest payments, which would be subject to regulation. The attorney general’s office has sued Elkins’ company (unsuccessfully), and the Legislature, after several previous attempts, finally gave state regulators authority over the industry this year—but not without some unseemly shenanigans by Elkins. After the chairman of the House Business and Industry Committee, on which Elkins sits, introduced a bill declaring that sale-leaseback transactions are not loans, a lawyer for Elkins’ company testified in favor of the bill—but neither he nor Elkins disclosed the connection. Later, Elkins’ name surfaced again involving a bill backed by the payday-loan industry, a competitor of Elkins’ sale-leaseback industry. A Nevada company with links to Elkins (but no other apparent Texas concerns) had hired a lobbyist to fight the payday-loan bill. Referring to Elkins, an ethics advocate for Common Cause told the Austin American-Statesman, “If I were a member, any bill [he] had would be suspect to me.”

Elkins’ involvement in the issue is not illegal but does create the appearance of self-dealing. It gets in the papers and it lowers public confidence in the Legislature. Perhaps he could be forgiven if he made any noticeable contribution to the public weal, but no. He filed ten bills this session and passed one, making it legal to stop, stand, or park your vehicle in your own driveway in a manner that blocks a sidewalk. If only he had quit while he was ahead.

See also this Observer story from July. The only difference between then and now is that Elkins has since moved into the payday lending business. I don’t know what Houston or other cities that want to rein in payday lenders can do to him. At some point, it will have to be up to the voters to kick him out.

More on the Postal Service as financial service provider

I still think it’s a good idea, and so do a lot of other people.

The Postal Banking Consumer Survey [PDF] asked more than 1,600 consumers, many of whom do not have access to traditional banking services, whether or not USPS should enter the banking arena.

Most consumers, about 63%, reported that the addition of services, such as bill paying, check cashing, and small-dollar loans, would not matter to them.

However, a majority, about 58%, of consumers support the argument that providing financial services at USPS branches would expand access to safe financial products for low- and middle-income Americans while providing a new sources of revenue for the Postal Service.

Nearly 64% of consumers who identify as using alternative financial services believe the expansion of safe financial services would be beneficial to both consumers and the postal service.

Conversely, only 32% of those surveyed said they believe that providing financial services at Postal Service branches would divert resources from mail delivery and give the government-run Postal Service an unfair advantage over privately-run companies that already offer financial services.

“There is a market here but it’s limited,” Alex Horowitz, research officer for Pew Charitable Trusts, says. “When we look at people who already are using alternative services it changes. There is quite a bit of interest for lower-cost services among those who already use alternative services.”

[…]

Consumers who currently use alternative financial services were more likely to use lower-cost services though their local post office branch.

Nearly 46% would use check-cashing, 27% would purchase prepaid cards, 46% would use bill-pay services and 41% would consider payday loans through the postal service.

See here for the background. We all know that payday lenders are a big issue for a lot of people, but so are things like check cashing services, mostly because of the large fees they charge. The point of this idea is that the Postal Service could be a lower cost provider of conveniences like check cashing and bill paying. Another advantage of using the USPS for this is that there are post offices everywhere.

The USPS Office of Inspector General first made the case for expanding into financial services this January, calling itself “well positioned” to meet the needs of underserved Americans. It didn’t take long for the idea to garner attention from high-profile legislators like Sen. Elizabeth Warren, (D-Mass), who joined other lawmakers and experts at a Pew conference Wednesday to debate the merits and pitfalls.

There’s consensus on the easy part: the problem. Most people agree that an astounding number of Americans live outside the mainstream financial system and this often has a negative impact on their financial lives and futures. In total, they comprise a quarter of US households and spend tens of billions on fees and interest each year. To put this in perspective, Warren likes to point out that these Americans spend as much money on financial services as they do on food, which is to say they spend $2,412 a year per household, or roughly 10% of their income.

Clearly the big question that remains is whether the post office is the right vehicle for delivering change.

Postal services in dozens of other countries, including Japan, Switzerland and the UK, already do it. Many make big money from it. The USPS itself offered a savings program for over fifty years, but discontinued it in 1967.

One thing the post office has going for it is an extensive brick-and-mortar network, with over 30,000 locations in nearly every zip code. While there are three times as many bank branches, they don’t cover as many zip codes. In Montana, as in many rural places, “you can find yourself more than 75 miles from the nearest bank branch,” but close to two or three post offices, says Pew’s Clint Key. There’s a term for this: bank desert. Indeed, Pew found that 10% of census tracts (neighborhoods, essentially) don’t have a bank branch within five miles, but most do have a post office close by.

The problem is getting worse, not better, for America’s underserved families. Since 2008, 93% of bank branch closings have been in zip codes with below-national median household income levels. Meanwhile, banks have been opening branches in areas with median incomes above $100,000.

The post office also touts its trusted brand, saying consumers who walk in to any location would know they were getting safe, simple financial products. A Pew finding shows that 71% of people view the US Postal Service favorably, compared to 9% for payday lenders, 21% for check cashiers and 56% for banks.

“This is an opportunity for the post office to use its space and its employees more efficiently to bring needed services to more Americans,” said Warren.

If the post office were to get into banking, it wouldn’t just be out of the goodness of its heart. It estimates a revenue of $8.9 billion each year. If true, this is a big deal for an agency in crisis. The post office loses money every year. Thanks to the internet, mail volume has plunged 22% over the last five years. Meanwhile, the USPS is struggling with a Congressional edict that it pre-fund employee benefits.

“This is an existential crisis,” said James Gattuso, senior research fellow in regulatory policy at the Heritage Foundation.”The postal service needs a new line of business.”

Sure seems like a good fit all around. Getting into the short-term loans business is another matter, as it’s inherently risky and would require Congressional approval, which these days is nigh impossible to achieve. Still, this has the potential to do a lot of good for a lot of people. It’s worth serious consideration.

Wonkblog on Texas cities’ efforts to combat payday lenders

It’s always nice when the national media notices something positive happening in Texas instead of the usual.

The number of payday and auto title loan outlets has skyrocketed since 2005. (Texas Appleseed)

Four years ago, ACE Cash Express was the company that turned Dallas Council member Jerry Allen into the payday loan industry’s worst enemy.

The day before he was about to celebrate the launch of the Bank On Dallas program, which helps people get bank accounts, Allen got a call from a lobbyist asking if he would meet with the ACE’s executives. He didn’t have time, and declined. But the next day, along with regular council business, it became apparent that two council members had taken the meeting: They made a proclamation declaring ACE a model corporate citizen, after it donated $100,000 to relief efforts in Haiti. “It irritated me that these guys thought they could play that game,” Allen said. “It was game on.”

Texas has been a gold mine for payday lenders since 2005, when a court ruling sanctioned a loophole in usury laws that allowed them to charge whatever interest they pleased. Storefronts proliferated to the point where, according to a 2012 report by Texas Appleseed, the state accounted for 60 percent of the four biggest publicly traded firms’ profits. A major push by religious and community groups to pass restrictions in the state legislature failed in its last biannual session, in 2013; they only managed to require that borrowers be provided with certain disclosures when they took out loans.

Allen, however, had already started pushing on a different front. In 2011, he got an ordinance passed that limited the number of installments on a loan to four, each of which must pay down 25 percent of the loan principal, and can’t exceed 20 percent of a borrower’s paycheck. On top of that, the council passed zoning restrictions that prevented new shops from opening within certain distances from highways, residential areas, and other payday lenders.

It’s not really an aggressive set of rules. Because municipalities aren’t allowed to legislate much on top of an area already regulated by the state, Dallas didn’t limit the actual interest or fees the lenders could charge, so as to remain safe from legal challenges. Still, Allen says, not one single new “credit service organization,” as they’re called in the state, has applied to set up shop in Dallas since it passed. And meanwhile, 17 other cities — including most of the largest, besides Fort Worth — have passed similar rules. That’s left advocates, especially Allen, feeling triumphant.

“You can run, but you better run fast, because we’ve got jets on,” Allen says. “Go down your rabbit holes, because we’re going to put concrete in ’em. We’ve got ’em on the run, and we’re shooting ’em in the back.”

Allen doesn’t hold out much hope that Texas’ next legislative session will significantly strengthen or standardize the ordinances that cities have been adopting on their own; he’s just hoping the conservative House won’t overrule them. In the mean time, he’s waiting for the CFPB’s expected rulemaking in the fall, which could include national requirements for a borrower’s ability to pay back loans, even though the agency can’t cap the interest rates outright. And importantly, he’s working to develop alternative banking services, so people don’t find themselves in Gail Rowland’s shoes in the first place — a common critique of the industry, which says people will just seek out even worse options if they can’t borrow against their next paycheck.

One possible substitute: Community loan centers, like this one in Brownsville, Tex., which offer more affordable small-dollar loans. They’ll have an easier time expanding once payday lenders retreat, as they have in most places that place serious limits on their operations.

“If there’s a situation where people don’t have access,” Allen says, “well then dad gummit, we’ve got to get it to them.”

The “go where the customers are” approach of Select Federal Credit Union (SFCU) in San Antonio is another possible substitute. I’m glad to see people paying some attention to that, because it undercuts the one argument that the payday lenders have for themselves, and I strongly suspect they will not be able to handle this kind of competition. I had forgotten about the zoning restrictions in the Dallas ordinance. The Houston ordinance doesn’t have anything like that. Not because of the Z-word – we have no problem restricting where bars, liquor stores, and strip clubs can operate; there should be no reason we couldn’t do the same with payday lenders. That’s something I’d like to see considered as an extension of our ordinance down the line, maybe next year. I understand CM Allen’s pessimism about state action on payday lenders, but do keep in mind that one candidate for Governor has helped lead the fight against payday lenders, while the other candidate greatly enabled their expanded presence. Just look at that chart above to see the effect. You want to improve the odds of state action, or at least greatly reduce the odds of any attempt to claw back what the cities have done, you know who to vote for this fall.

CFPB makes its presence felt in Texas

Good for them.

Texas-based payday lender ACE Cash Express has agreed to pay $10 million to settle allegations by the federal Consumer Financial Protection Bureau that it used harassment and other illegal tactics to push borrowers into a cycle of debt.

Under the agreement, the company, one of the nation’s largest payday lenders, will pay $5 million in refunds to consumers and will also pay a $5 million fine, the bureau said Thursday.

“ACE used false threats, intimidation and harassing calls to bully payday borrowers into a cycle of debt,” bureau Director Richard Cordray said in a statement. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”

Supporters of payday lending say it offers a needed service to consumers who have few options for short-term loans. Critics say the companies prey on struggling people by charging high fees and trapping borrowers in a cycle of debt.

Nice. The CFPB has been making noise about payday lenders for awhile, with some new regulations still to come. Hey, if you’re not lucky enough to live in a city that has passed a payday lending ordinance, the CFPB is what you’ve got. More like this, please.

Going where the payday lenders are

The most frequent defense I hear of payday lenders it that there’s a demand for the kind of short-term low-dollar loans that they provide that aren’t provided by other financial institutions, and even if they were those institutions don’t exist in the neighborhoods that generate the demand for these loans. That doesn’t come close to justifying the payday lenders’ exorbitant rates and fees or their predatory practices, but I admit that there’s a need that will get fulfilled one way or another. Given that, wouldn’t it be preferable by far to have more reputable financial institutions in the neighborhoods that need these services, operating in a manner that serves the customers rather than preys on them? One such institution is giving that a try in San Antonio.

Select Federal Credit Union (SFCU), an outspoken opponent of the payday lending industry, is trying to fill the gap from two directions: accessibility and availability.

One reason payday lenders were successful is that they were densely present in their target markets. While their clients fall across a range of income brackets, the highest concentration is in low income areas, where many are unbanked.

“We definitely have a proliferation of payday lenders, and bank branches are sparse,” said District 2 Councilwoman Ivy Taylor.

SFCU realized that to be effective, they needed to be in the neighborhood. They needed to find places along people’s pathways. Convenience is an issue for those who take public transit or walk to and from work with their paycheck in their hands.

So SFCU found a home in the middle of their target market: Ella Austin Community Center, affectionately known around the neighborhood simply as “Ella Austin” or “Ella.”

[…]

SFCU seized the moment to set up shop on the campus, giving them access to senior citizens and families who use the services offered at Ella Austin. They also have access to the employees of Ella Austin and the resident businesses. Employed people are statistically just as likely to use payday lenders as those without steady income.

SFCU goes a step further even, as they have the technology to bring banking directly to the homes of those who have trouble accessing in person or online. They are also working on other partnerships with local businesses and institutions to bring virtual or mini-branches to their facilities.

Ella Austin is easily walkable for neighborhood residents, and the branch has a slower, more relational atmosphere.

“We want to dedicate this branch to sitting down and talking with people,” said John Garcia, head of Business Development and Marketing at SFCU.

From their post at Ella Austin, SFCU is poised to offer not only accessible financial services, but also financial education. SFCU is a designated Community Development Financial Institution, one of only two in San Antonio. They keep their footprint small and nimble, with a focus on increasing financial stability for their members.

“We welcome Select Federal Credit Union because they have the flexibility to do more outreach than a traditional bank,” said Taylor.

The basic idea here is simple and well-conceived. Any business wants to be where the potential customers are, and Lord knows there’s plenty of room to compete with payday lenders on price and service. Those are the pillars behind the concepts of allowing post offices and WalMart to act as banks – they exist everywhere, including a lot of places where there are no traditional banks, and they can provide standard services like checking, savings, and low-dollar loans at very reasonable costs. Getting credit unions into the game is even better, as they wouldn’t need to seek regulatory approval to take on this business and they’ve generally been a force for good overall. I will be very interested to see how this plays out – there are no guarantees, of course, but this is a great idea that has real hope of succeeding. I hope their peers in other cities are watching how this goes, too.

Houston’s payday lending ordinance is now in place

Part of me hopes that there’s a lot of complaints, and part of me hopes there’s very few.

Houston’s stringent new rules on payday and auto title lenders took effect Tuesday, reviving industry complaints that it would drive companies out of business, or at least out of the city, but giving borrowers a clearer path out debt.

“We’ll see stores close, we’ll see people laid off,” said Rob Norcross, of Consumer Service Alliance of Texas, a loan industry group. “You’ll have some companies that will maintain stores at lower revenue levels, and they’ll probably close other ones. We’ve only seen a couple companies close up shop totally in the other large metropolitan areas. It will be a gradual process.”

He predicted borrowers whose needs exceed the city’s new limits will go to lenders in unregulated areas, get a loan online or take out several small loans to add up to the amount they want.

Payday lending involves small, short-term loans that avoid legal caps on fees and interest that apply to such mainstream lenders as banks. Title loans operate similarly and are secured by the borrower’s automobile title, leaving the vehicle at risk for repossession. Borrowers typically lack the funds or credit to get loans any other way.

In the 10-county Houston region, home to a fourth of the state’s 3,240 such lenders, data show borrowers refinance more and pay on time less than state averages and that more than 100 title borrowers have their cars repossessed each week.

Houston’s ordinance limits 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 can be refinanced no more than three times, while installment loans can include no more than four payments. The principal owed must drop by at least 25 percent with each installment or refinancing.

[…]

On the first day of enforcement, city officials had identified 361 active payday and auto title lenders inside Houston’s city limits, 309 of which had registered under the new rules as of Tuesday morning.

Toya Ramirez, a staff analyst in the city’s Administration & Regulatory Affairs department hired to oversee the ordinance, said it was unclear which of the remaining 52 lenders have closed, moved outside city limits or simply failed to register.

Ramirez said the city will approach enforcement using a complaint-based system, and said there are no stings or compliance audits planned.

The ordinance was passed in December, with a grace period to allow the lenders to get up to speed. Houston’s original plan was to do enforcement more aggressively, but I’m okay with this approach. For now, anyway. If the payday lenders are mostly compliant with the ordinance, there won’t be any need to be more proactive. My prediction is that despite Rob Norcross’ crocodile tears the industry will continue to profit handsomely, just a little less handsomely than before. If that does wind up squeezing a few operators out – as we can see by this map, there’s plenty of them – that will be fine by me.

The CFPB is almost ready to roll out payday lending regulations

I can’t wait to see what they come up with.

Whenever governments start thinking about cracking down on small-dollar, high-interest financial products like payday loans and check cashing services, a shrill cry goes up from the businesses that offer them: You’re just going to hurt the poor folks who need the money! What do you want them to do, start bouncing checks? 

A field hearing held by the Consumer Financial Protection Bureau today was no exception. The young agency has been studying how the industry functions for a couple years and is now very close to issuing new rules to govern it. To start setting the scene, CFPB Director Richard Cordray came to Nashville — the locus of intense payday lending activity recently — to release a report and take testimony from the public.

The report, building on a previous white paper, is fairly damning: It makes the case that “short term” loans are usually not short term at all, but more often renewed again and again as consumers dig themselves into deeper sinkholes of debt. Half of all loans, for example, come as part of sequences of 10 or more renewed loans — and in one out of five loans, borrowers end up paying more in fees than the initial amount they borrowed.

[…]

Passing a rate cap, however, is not the only remedy. In fact, it’s not even possible: The CFPB is barred by statute from doing so.* And actually, the Pew Charitable Trusts — which has been tracking payday lending for years — doesn’t even think it’s the best approach.

“The core problem here is this lump-sum payday loan that takes 36 percent of their paycheck,” says Pew’s Nick Bourke, referring to the average $430 loan size. “The policy response now has to be either eliminate that product altogether, or require it to be a more affordable installment loans.”

Bourke favors the latter option: Require lenders to take into account a borrower’s ability to repay the loan over a longer period of time, with monthly payments not to exceed 5 percent of a customer’s income. That, along with other fixes like making sure that fees are assessed across the life of the loan rather than up front, would decrease the likelihood that borrowers would need to take out new loans just to pay off the old ones.

See here for the background. It’s fine by me if the CFPB takes a different approach than usury caps. States and localities can still do that themselves if they wish, with the CFPB’s rules serving as a regulatory floor. It’s a step forward any way you look at it, with the potential to do a lot more if needed.

Now, the installment loan plan wouldn’t leave the industry untouched. When Colorado mandated something similar, Pew found that half of the storefront payday lenders closed up shop. But actual lending didn’t decrease that much, since most people found alternative locations. That illustrates a really important point about the small dollar loan industry: As a Fed study last year showed, barriers to entry have been so low that new shops have flooded the market, scraping by issuing an average of 15 loans per day. They have to charge high interest rates because they have to maintain the high fixed costs of brick and mortar locations — according to Pew, 60 percent of their revenue goes into overhead, and only 16 percent to profit (still quite a healthy margin). If they were forced to consolidate, they could offer safer products and still make tons of money.

Meanwhile, there’s another player in the mix here: Regular banks, which got out of the payday lending business a few months ago in response to guidance from other regulators. With the benefits of diversification and scale, they’re able to offer small-dollar loans at lower rates, and so are better equipped to compete in the market under whatever conditions the CFPB might impose.

Actually, there are two other potential players here as well: Post offices and WalMart stores, both of which could do a lot to streamline this industry by aggressively competing on price. If that happens to drive a lot of small, inefficient players out of the market, too bad for them. These options would unfortunately require an act of Congress to become reality, and the odds of that are vanishingly small. But the point is that those options exist, and if the regs that the CFPB does put forth winds up squeezing a lot of the existing players, the demand will be there for bigger dogs to come in. In most cases that would be bad, but this is the exception. We’ll see how it goes. And whatever does eventually happen, let’s not forget that if we had less poverty, we’d have less demand for payday lending. Consider that yet another argument for raising the minimum wage.

Another way to squeeze the payday lenders

I wholeheartedly approve of this.

The Postal Service (USPS) could spare the most economically vulnerable Americans from dealing with predatory financial companies under a proposal endorsed over the weekend by Sen. Elizabeth Warren (D-MA).

“USPS could partner with banks to make a critical difference for millions of Americans who don’t have basic banking services because there are almost no banks or bank branches in their neighborhoods,” Warren wrote in a Huffington Post op-ed on Saturday. The op-ed picked up on a report from the USPS’s Inspector General that proposed using the agency’s extensive physical infrastructure to extend basics like debit cards and small-dollar loans to the same communities that the banking industry has generally ignored. The report found that 68 million Americans don’t have bank accounts and spent $89 billion in 2012 on interest and fees for the kinds of basic financial services that USPS could begin offering. The average un-banked household spent more than $2,400, or about 10 percent of its income, just to access its own money through things like check cashing and payday lending stores. USPS would generate savings for those families and revenue for itself by stepping in to replace those non-bank financial services companies.

[…]

But while ending triple-digit interest rates and fine-print tricks is a good thing for consumers, it doesn’t reduce the demand for those financial services. The USPS could slide into that space and meet that need without preying upon those communities. “Instead of partnering with predatory lenders,” David Dayen writes in The New Republic, “banks could partner with the USPS on a public option, not beholden to shareholder demands, which would treat customers more fairly.” America’s post offices are an ideal physical infrastructure for furnishing these services to communities currently neglected by banks. Roughly six in 10 post offices nationwide are in what the USPS report calls “bank deserts” — zip codes with either one or zero bank branches.

I noted that David Dayen story in a previous linkdump. I like this idea for the same reason why I like the idea of letting Wal-Mart open banks: It would provide low-cost banking and financial services, including short-term, low-dollar loans, to a large class of people whose only current options are high-cost predatory lenders. Anything that puts downward pressure on the price of these services and makes savings and checking accounts available to people who don’t have them is a win in my book. This idea should especially appeal to people who don’t care for having cities step in to regulate payday lenders, since it would reduce barriers to competition and allow for real customer-friendly innovation in a highly non-customer-friendly market. What’s not to like?

Abbott outraises Davis on 30 day report

Would have been nice to have done better.

Sen. Wendy Davis

Sen. Wendy Davis

Republican Attorney General Greg Abbott outraised Democratic state Sen. Wendy Davis by more than 3-to-1 in the first three weeks in January in the race for governor, according to figures reported by each campaign Monday.

The $3.1 million-plus that Abbott raised from Jan. 1 through Jan. 23, the period covered by campaign finance reports due Monday, gave him $29.4 million in cash on hand for the race against Davis.

Davis, of Fort Worth, raised $912,996 over the same period, counting two of her committees and a joint effort with Battleground Texas, which is dedicated to making Texas competitive for Democrats. She reported she has $10.2 million in cash on hand.

The comparison could take off some of the shine from the big money that Davis hauled in during the last six months of 2013 when, counting the same three fundraising committees, she took in $12.2 million compared with $11.5 million for Abbott, long a top fundraiser.

“With the previous announcement, she got a lot of positive attention because she had raised more than people expected and had more relative to Abbott than anyone expected,” said University of Texas-Pan American political scientist Jerry Polinard. “This is another way (for Abbott) of reminding people, ‘Wait a minute, we are still in a very red state. I’ve got more money.'”

It’s also a way for the media to rehash its stories about Davis from the past two weeks, since apparently there isn’t anything else to report on. Candidates in contested primaries have to make 30 day and 8 day reports; candidates like Leticia Van de Putte, who are unopposed in the primary, get to go till July before their next reporting deadline. At this pace, Davis would raise about $10 million for the rest of the year, which ain’t nothing but which would only get her a bit more than halfway to her stated goal of $40 million. The great thing about having a large donor base, as she does, is that you can go back to them and ask for more. Maybe not so quickly, however. As for Abbott, it sure is nice to have a bunch of panicky zillionaires in your corner; hr took in more from five deep-pocketed benefactors than Davis did overall. I’m sure that was the message they meant to send.

On a side note, we find that Greg Abbott received even more contributions than we first thought from payday lenders last year. My guess is he’s taken in more in the current report. Maybe someone can check that when the reports are posted. Like I said, nice to have some deep pockets you can reach into. Campos has more.

How Greg Abbott enabled the payday lenders

The Lone Star Project kicks it off:

Abbott’s Green Light to Predatory Lenders

Key AG document provided payday lenders a loophole to bilk Texans

Greg Abbott’s office issued the key document that has allowed payday lenders to operate outside of Texas usury laws and exploit Texans across our state. A letter issued from the office of the Attorney General carefully lays out that payday lenders in Texas can take advantage of a loophole used by credit service organizations to avoid Texas laws preventing unscrupulous lending. It is essentially a “how-to guide” for payday lenders to expand and grow their predatory lending businesses.

Payday lenders had been nervous about expanding their operations in Texas, but Abbott’s letter gave them the go-ahead they needed. The respected financial industry publicationAmerican Banker reported how payday lender Ace reacted to the Abbott letter:

“The Irving, Tex., company originally saw too much legal risk in the CSO setup, in which payday specialists can collect as much as 20% in fees for arranging a short-term loan from a third-party lender. But this month Texas’ attorney general, Greg Abbott, sent a letter to the state’s Office of Consumer Credit Commissioner saying that CSOs are permissible. So on an earnings conference call last week Ace said it will begin brokering loans as a credit service organization sometime in the next two quarters.” (American Banker, February 1, 2006)

Attorneys general in many states act aggressively to reign in abuse by predatory lenders like Cash America and ACE, but not Greg Abbott. In fact, Greg Abbott has been the payday lender industry’s facilitator and protector.

Abbott gave the green light, and pay day lenders hit the gas. Payday lender outlets have proliferated all across Texas during the Perry/Abbott era. In 2004, there were approximately 300 payday lenders in Texas. By 2011, there were over 3,000. Right now, there are more payday lending establishments in Texas than there are McDonald’s and Whataburger locations combined.

So, don’t look for Greg Abbott to jump on the bandwagon to get rid of William J. White or impose any more restrictions on predatory lenders, unless of course the payday lenders themselves or other Austin insiders give him the green light.

Background

Recent news reports have detailed that William J. White, the chairman of the Texas Finance Commission – the state agency intended to protect Texas consumers – attacked Texas consumers and defended predatory lenders over outrageous payday loans that result in borrowers being saddled with loan costs of sometimes more than 500 percent of the principal. White’s bottom line is that any Texan gouged by an unscrupulous payday lender is on their own and should blame themselves for their predicament.

State Senator Wendy Davis quickly and decisively called for White’s resignation.

Who is William J. White?

White is not just the chairman of the Texas Finance Commission, he is also vice president of Cash America, one of the largest and most notorious predatory lenders in the country. Cash America has hundreds of payday lending storefronts all across Texas, many of them right outside military bases where military families, who are often under financial pressure, are exploited. Earlier this year, Cash America was fined for abusive lending, and exploitation of military personnel was cited specifically. During the last legislative session, Cash America and other payday lenders spent over $4 million dollars lobbying the GOP-controlled Texas legislature.

Soaking Soldiers

A key target for predatory lenders is active-duty military personnel. It is no coincidence that payday lender storefronts proliferate around active-duty military bases and other installations. Holly Petraeus, head of the Office of Servicemembers Affairs at the Consumer Financial Protection Bureau, recently said that payday lenders congregate outside bases “like bears on a trout stream.” Current federal law is not sufficient to protect against predatory lenders, especially when state AGs like Abbott are predatory lender allies.

The El Paso Times fielded the ball:

Abbott’s campaign did not respond to a request for comment on Monday. It also has not responded when asked for more than a week whether Abbott believes the Texas payday lending industry needs to be reformed.

The El Paso City Council [debated on Tuesday] whether to enforce local limits on payday and auto-title lenders that in some cases charge annual interest at rates greater than 700 percent.

It and most other major Texas cities have passed ordinances in the face of unwillingness by the Legislature to place stricter limits on the industry.

Religious and charitable groups also have called for reforms of an industry they say traps poor people in a cycle of debt.

[…]

The concept of usury — unconscionably high interest rates — goes at least as far back as the Old Testament.

It’s also part of the Texas Constitution, which says that in the absence of legislation, interest rates in the state are limited to 10 percent a year.

Lenders that are licensed and regulated under Texas law face caps of their own. Commercial loans in most instances can’t exceed 18 percent except when the loan is greater than $250,000, when they can’t exceed 28 percent.

Auto loans can’t exceed 27 percent. Short-term loans by licensed lenders can’t exceed 150 percent and pawn loans can’t exceed 240 percent.

But the letter by the attorney general that was released Monday said fees associated with payday and title loans have no limits.

Emphasis mine. As PDiddie notes, the El Paso Times has led the way on this story. He also notes that recent Peggy Fikac column about Davis’ “oops” moment, in which her campaign got some campaign contribution figures confused. Abbott attacked her for that, and also for her vote to confirm William White in 2009. The difference between Davis and Abbott, as epitomized by Abbott’s snivelly refusal to answer a simple question, is that Davis recognizes that her initial action was in error, and is now willing to do something concrete about it. Abbott is just hiding behind a wall of “no comments”. That’s some kind of bold leadership right there. Meanwhile, also in the “let’s do something to fix what’s obviously broken” camp are Sens. John Whitmire, Rodney Ellis, and Sylvia Garcia, who joined the call for White to resign. Which won’t happen until Abbott and/or Rick Perry see that he’s a problem, too. Anyone want to bet on when that might happen?

The fox has always guarded the henhouse

News item: Rick Perry appointee says something obnoxious and privileged about the people his company fleeces for his fortune.

The official who oversees Texas’ consumer watchdog says payday-loan customers — not the lenders — are responsible when the loans trap them in a cycle of debt.

William J. White says it’s out of line to even question an industry that has had its practices called exploitative by many critics, including the Catholic Church.

White was appointed by Gov. Rick Perry to chair the state agency that oversees the Office of the Consumer Credit Commissioner, which is responsible for protecting consumers from predatory lending practices.

White also is vice president of Cash America, a major payday lender that the new U.S. Consumer Financial Protection Bureau last month socked with its first sanctions for abusive practices.

White didn’t return calls earlier this month for a story about his dual roles as payday lender and consumer defender. But, on Dec. 12, as the Finance Commission wrapped up its monthly meeting in Austin, he agreed to answer a few questions.

“What you’re doing is totally out of line,” White said, as the interview wound down. “This fox-in-the-henhouse stuff is totally political.”

His company and others in the industry have been accused of making payday loans to desperate people in amounts they can’t afford to repay. Customers become trapped in a cycle in which all of their disposable income — and some non-disposable income — goes to payday lenders, critics say.

Former El Paso city Rep. Susie Byrd spearheaded a payday-lending ordinance early this year that is on hold until the city council debates it on Jan. 7.

White was asked to respond to Byrd’s claim that payday lenders in Texas profit by making people poor.

“That’s really is not worth responding to,” White said. “People make decisions. There’s nobody out there that forces anybody to take any kind of loan. People are responsible for their decisions, just like in my life and in your life. When I make a wrong decision, I pay the consequences.”

Ha ha ha ha ha. Dude, you’re rich and politically connected. You don’t pay consequences for anything. You have people for that.

Anyway. Sen. Wendy Davis took exception to White’s offensive remarks.

Democratic governor contender Wendy Davis is calling on William J. White to step down as chairman of the Finance Commission of Texas for saying people who take out payday loans are responsible for their own situations.

White, vice president of Cash America, should be an advocate for consumers on the state board but instead makes excuses for his own predatory industry, Davis said.

“William White can’t protect Texas consumers while he represents a predatory lending company on the side,” she said.

That’s a feature, not a bug. I’ll get back to that point in a minute. In the meantime, Lisa Falkenberg presses the point.

In April 2012, [White] signed the commission’s resolution complaining of the “complexity” and “confusion” of local payday regulations. He asked the Legislature “to more clearly articulate its intent for uniform laws and rules to govern credit access businesses in Texas.”

In other words, he asked lawmakers to bigfoot (or, pre-empt) local protections, forcing cities to conform to the state’s do-nothing regulation.

[…]

“There’s nobody out there that forces anybody to take any kind of loan. People are responsible for their decisions … ,” White told the Times reporter. “When I make a wrong decision, I pay the consequences.”

There’s nobody out there who makes you buy gas after a hurricane, either, or book a hotel room because your flood-prone house flooded. Yet the state, through Texas Attorney General Greg Abbott, still protects people against price gouging and profiteering on misery after such an event. I guess the misery of the working poor is another matter.

[…]

Earlier this week, Democratic gubernatorial candidate and state Sen. Wendy Davis, of Fort Worth, declared White’s comments a “blatant conflict of interest,” and called on Perry to remove White from the state post.

Perry – no surprises here – isn’t budging. And what from Abbott, the Republican candidate hoping to succeed Perry? As of deadline Tuesday, silence.

The attorney general’s spokesman didn’t respond to a phone message or to a list of questions asking, among other things, whether he would have appointed a payday loan executive to watch over the payday loan industry. Abbott himself has taken more than $21,000 from Cash America’s PAC, according to campaign finance records. He also has promised a fresh perspective and transparency in government.

Here’s a chance to prove it. Abbott should follow Davis’ lead and call for White’s ouster, condemn the commissioner’s comments and show he’s prepared to lead differently, to cast aside old ways, and to replace cronies with competent, fair appointees.

Oh, Lisa. You’re such a kidder. Of course Greg Abbott will never do this. In fact, he’s already defending White. (Sen. Sylvia Garcia, on the other hand, is with Wendy.) Hell, the only reason he goes after gasoline price gougers is because they directly affect everyone, including suburban Republican voters, who scream bloody murder when it happens. The people whose lives are being wrecked by payday lenders don’t have voices that Greg Abbott hears. To him, that’s just the free market. And if it has to be regulated at all, best to have someone at the helm that really, truly understands the needs of the businesses that are being regulated. Anyone besides me remember the Texas Residential Construction Commission, or TRCC? Remember who Rick Perry appointed to be the first head of that commission? Here, let’s take a stroll down memory lane.

Consider how the Residential Construction Commission came to be created and how it was appointed.

According to a report released earlier this year by public advocacy groups, Texas homebuilders donated $5 million to executive and legislative candidates, political parties and political action committees during the 2002 election cycle, which completed the Republican takeover of the statehouse.

Houston homebuilder Bob Perry, a major contributor to Gov. Rick Perry and Republican causes, gave $3.7 million of the total.

Bob Perry (who isn’t related to the governor but obviously shares his political philosophy) and other homebuilders were a driving force behind creation of the new commission. The new law established some construction and warranty standards for the new agency to regulate, but its primary purpose was to offer homebuilders protection against lawsuits brought by unhappy customers.

Homeowners now have to go through an expensive, commission-run dispute resolution process before pursuing any legal action over construction complaints. This is more bureaucratic and potentially more intimidating than the mandatory arbitration process that most builders already required in new home contracts.

The law also limits the damages that homeowners can recover, and the makeup of the commission has consumers justifiably concerned.

The law requires four of the nine commissioners to represent builders. State regulatory boards typically include some members of the industries being regulated.

The argument is that technical, industry input is necessary for effective regulation, but the fox-and-henhouse practice also is a testament to the lobby’s influence.

Two of the “public” members appointed to the Residential Construction Commission by the governor also have strong ties to the homebuilding industry. And, even more troubling for consumers, one of the industry representatives, John Krugh, an executive of Bob Perry’s homebuilding company, was appointed to the commission by Rick Perry less than a month after the governor had received a $100,000 political donation from Bob Perry.

The governor’s office denied any connection between the contribution and the appointment, but skeptical consumers should be forgiven.

The TRCC was such a crony-tastic debacle that it finally got sunsetted in 2009. But the philosophy is ever with us. William White is just John Krugh in another context. Same story, different chapter. And it’s always been fine by Greg Abbott. If Greg Abbott had ever had an inkling to put the interest of consumers over the interest of business, he’d have shown it before now. If you want that to happen, you don’t want Greg Abbott as Governor, because he’ll keep doing what he and Rick Perry have always done. It’s nothing new, and it’s not a secret.

Payday lending ordinance passes

In the end, it wasn’t close.

The Houston City Council overwhelmingly passed restrictions on payday and auto title lenders Wednesday, avoiding rumored parliamentary maneuvers to delay the vote and calling on the state Legislature to follow suit.

The vote was 15-2, with Councilwoman Helena Brown and Councilman James Rodriguez opposed. Rodriguez did not seek to delay the measure as had been speculated.

[…]

“Something must be done; something should be done,” Councilman Andrew Burks said. “Our Legislature, they had the ball and dropped it. I don’t like this, but I have to vote for it because … this is the only thing on the table, and it does do something.”

Councilwoman Wanda Adams, who said her office has helped seniors get back cars that had been repossessed after they defaulted on title loans, praised the outcome.

“I’m so proud to know we are taking a stand in protecting our constituents throughout our community,” Adams said. “I think this is something right.”

The measure will take effect July 1, with the city’s new budget year.

The Chron story from yesterday morning about the vote that was scheduled to take place made it sound like it would be closer, though it didn’t quote any member of Council that claimed to be undecided. The two that did vote against it were not a surprise. It’s what CM Brown does, and CM Rodriguez, the subject of a scathing column by Lisa Falkenberg that made Campos see red, was known to not object to payday lenders. The only question was whether CM Rodriguez would tag the ordinance – he was absent at the Council meeting last week and thus eligible to apply a tag, though that is usually not done – which would have the effect of pushing it onto the new Council. As it turns out, that likely would not have made any difference.

But I’m glad they didn’t wait. This was important, it needed to get done, and now there’s that much more time next year to do other things. Even with the head start, there are still plenty of items on Mayor Parker’s third term agenda. So far, so good. Statements praising the ordinance have been sent out by Sens. Rodney Ellis and Sylvia Garcia, as well as the AARP, who like Sen. Ellis calls the ordinance a message to the Lege to get its act together. PDiddie, Stace, Texas Leftist, Texpatriate, and the Observer have more.

Enforcing a new payday loan ordinance

Mayor Parker’s proposed payday lending ordinance will be up before Council today, though it might wind up being delayed until the new Council is sworn in. It’s not clear yet how the vote might go, but in the meantime it’s worth pondering what the enforcement mechanism for this new law would be. Other cities that have passed similar ordinances, on which the Houston version is modeled, have taken it slow so far.

Martha Hernandez, who was hired to handle enforcement of the ordinance for the city of Austin, said four complaints have been referred for prosecution in 19 months. Her staff is nearly done with an analysis showing which lenders are most likely violating the ordinance, based on the accuracy of their reports, complaints and other data. That list will guide compliance audits, she said.

“Our process, we anticipated it would be complaint-driven, but there’s just not very much demand on that. We’re constantly looking at what we can do to better inform the public about the ordinance,” Hernandez said. “The plan has always been to do audits in tandem with the complaint-based investigations.”

Dallas City Councilman Jerry Allen said more than 30 lenders were closed for violating a 2011 ordinance governing where the stores could operate, but agreed Dallas’ enforcement has been slow. The lenders’ lawsuit made the city cautious, he said, and officials paused to see if the Legislature would act.

“I wish it was quicker, but we’ve had a pretty organized approach to it. Without question, it’s now time for enforcement,” Allen said, adding audits could come in weeks. “Dallas is coming. We will find violations, it’ll be $500 a day, and we’re going to keep coming.”

San Antonio Councilman Diego Bernal said his city has hired no staff and acknowledged the first year under the new regime was quiet. However, he said, workers have begun stings, and he said there is enough public awareness that valid complaints are coming in.

“Some of the violations have been rectified: They weren’t registered and so we got them registered. Now we’re at a point where what we’re left with are bad actors that are purposefully violating the ordinance,” Bernal said. “We’re pursuing all enforcement options, one of which is full-on litigation.”

Houston plans to begin enforcement on its estimated 550 such lenders July 1 to give proper time to staff up, [City Attorney David] Feldman said.

See here for more on what the cities have been doing. I’m okay with the approach described above. This would be a big change, and it’s sensible for the city to give the payday lenders some time to make themselves compliant, as well as some time to get its own ducks in a row for future enforcement. To some extent, Houston and other cities will need to rely on consumer complaints, but it’s a good idea to get to a point where someone at the city has a reasonably clear picture of how these businesses are operating and can step in as needed to deal with problems. And none of this changes the fact that the Legislature needs to get its own act together and pass a real law that builds on what these cities have done and holds these businesses accountable across the board. We’ll see if Council does their job today or if we have to wait till next year. Campos has more.

Runoff 8 Day Finance Reports

I did not get to looking at the 8 day finance reports for the November election – too many candidates, not enough time. But there was no reason I couldn’t take a gander at the 8 day reports for the runoff. Here’s the summary:

Candidate Office Raised Spent Loan On Hand ===================================================== Burks AL2 27,150 14,933 0 21,563 Robinson AL2 93,720 71,771 0 73,536 Kubosh AL3 60,045 59,221 15,000 13,192 Morales AL3 50,030 31,540 3,300 22,274 Brown Dist A 38,928 29,875 0 30,272 Stardig Dist A 35,909 15,102 0 45,321 Boykins Dist D 81,175 65,667 0 25,974 Provost Dist D 24,600 19,047 18,535 2,258 Garces Dist I 53,355 42,056 0 20,071 Gallegos Dist I 35,196 12,348 1,252 18,518

My comments, with links to the reports, is below.

BagOfMoney

Andrew Burks – Received $8,000 from Houston Fire Fighters Political Action Fund, $3,500 from Across The Track PAC, $1,000 from HAA Better Government Fund. He also got $375 from CM Bradford’s campaign, $250 from Justice of the Peace Zinetta Burney, and $250 from Jeri Brooks, who was the manager of Mayor Parker’s 2009 campaign and who is now working on behalf of the payday lenders. Burks’ wife Lillie contributed $1,500.

David Robinson – As has been the case all along, Robinson’s finance report reads as if he is the incumbent. He got $8,500 from TREPAC, $5,000 from Houston Council of Engineering Companies, $2,500 from HOME PAC, $2,500 from Houston Associated General Contractors PAC, $2,000 from HOME PAC, $1,500 from Allen Boone Humphries Robinson LLC, $1,000 from LAN PAC, $1,000 from Pipefitters’ Local Union No. 211 COPE Account, $500 from Bracewell & Giuliani Committee, $500 from Cobb Fendley PAC, $500 from HOUCON PAC, $500 from Houstonians For Responsible Growth-PAC, $500 from Amegy Bank of Texas PAC, and $250 each from Associated Builders & Contractors PAC, CDM Smith Inc. PAC Account, Houston Westside PAC, and Huitt Zollars Inc. Texas PAC. He also got $5,000 from Peter Brown, $1,000 from Locke Lord, which is Robert Miller’s firm, and $500 from Marcie Zlotnick, who I believe is CM Ellen Cohen’s daughter.

Michael Kubosh – $47,000 of the amount raised was his own contributions. He got $2,500 from the HPOU PAC, $1,000 from the IEC TX Gulf Coast PAC, $500 from the BOMA PAC, $1,000 from the Baker Botts Amicus Fund, and $1,000 from lobbyist/attorney/blogger Robert Miller, who is also currently working on behalf of the payday lenders.

Roy Morales – $5,000 from Houston Council of Engineering Companies Inc PAC, $1,000 from HVJ PAC, $2,300 from HOME PAC, $250 from Associated Builders & Contractors PAC, and $1,000 from himself. I did not see any contributions from Democratic-aligned PACs or prominent progressives on either his report or Kubosh’s. I’ll be very interested to see what the undervote rate is like in this race.

Helena Brown – $1,000 from IEC Texas Gulf Coast PAC, $500 from BAC-PAC, $250 from Seafarers PAC, $500 from Greater Houston Mobility PAC, $1,000 from Group 1 Automotive, Inc. PAC, $500 each from Linebarger Goggan Blair & Sampson LLP and Locke Lord Bissell & Liddell LLP (Robert Miller’s firm), and $1,000 from TREPAC, which remember is the realtors. She also got $500 from Toni Lawrence’s campaign and $100 from Bruce Tatro, meaning that her predecessors that backed her in 2011 are backing her again after sitting out the regular election cycle. Finally, she too received $250 from Jeri Brooks. I think it’s fair to say the payday lenders are choosing sides in these races.

Brenda Stardig – $10,000 from HPOU PAC, $5,000 from Houston Fire Fighters Political Action Fund, $2,000 from Houston Council of Engineering Companies PAC, $500 from Houston Westside PAC, $500 from Amegy Bank of Texas PAC, $250 from Arcadis G&M, Inc. Texas PAC, $500 from Associated Builders & Contractors of Greater Houston PAC, $250 from CDM Smith, Inc PAC, and $250 from Huitt-Zollars, Inc. Texas PAC. She has about $2,800 listed as expenses for postcards plus $200 from radio ads, but I don’t see much else that looks like voter outreach. Once again I wonder why she’s sitting on so much cash.

Dwight Boykins – Another report that looks like it belongs to an incumbent. Boykins raked in (deep breath) $5,000 from Houston Council of Engineering Companies Inc. – PAC, $5,000 from TREPAC, $2,750 from HOME PAC, $2,000 from BEPC LLC, $1,500 from HOUCONPAC, $2,000 from HAA Better Government Fund, $500 from Fulbright & Jaworski LLP Texas Committee, $500 from Andrews & Kurth Texas PAC, $1,000 from Linebarger Goggan Blair & Sampson, LLP, $250 from Houston Westside PAC, $1,000 from Pipefitters’ Local Union No. 211, $500 from Greenberg Taurig LLP Texas PAC, $250 from Cobb Fendley PAC, $500 from Bracewell & Giuliani Committee, $250 from CDM Smith Inc. PAC Account, $500 from LAN-PAC, $1,000 from Plumbers Local Union No. 68, $500 from Arcadis G & M, Inc. Texas PAC, $500 from Locke Lord (Robert Miller’s firm), $1,500 from Allen Boone Humphries Robinson, $1,000 from I.L.A. Local 26 P.A.C. Fund, $1,000 from Baker Botts Amicus Fund, $250 from Huitt-Zollars, Inc Texas PAC, $1,000 from HVJ Political Action Committee, $1,000 from Southwest Laborers District Council PAC, and $2,500 from HPCP Investments LLC. Whew! He also received $1,000 from CM Stephen Costello, and $500 from Anthony Robinson, who I guess did ultimately endorse in the runoff.

Georgia Provost – $1,000 from Woodpest Inc PAC was her only PAC contribution. She got $4,000 each from Alan and Renee Helfman; Alan Helfman is her campaign treasurer. She also received $1,500 from Peter Brown, and $250 from Anthony Robinson. Maybe Robinson didn’t pick a side in the runoff after all.

Graci Garces – $8,000 from TREPAC, $2,000 from Texas Taxi PAC, $500 from Seafarers PAC, $1,000 from Wolpert Inc PAC, $500 from Linebarger Goggan Blair & Sampson, LLP, $5,000 from Houston Fire Fighters Political Action Fund, $2,000 from HAA Better Government Fund, $2,500 from HPOU PAC, $2,000 from Across The Track PAC, and $2,500 from HOME PAC. She also got $500 from the James Rodriguez campaign – no surprise there – and $250 from One World Strategy, which is Jeri Brooks’ firm. In other business-pending-before-Council news, in addition to the Texas Taxi PAC money, Garces got $2,000 from Roman Martinez, the President of Texas Taxis, $1,000 from his wife Diana Davila Martinez (also Garces’ treasurer), and $1,000 each from Rick Barrett (VP of Texas Taxis), Duane Kamins (owner of Yellow Cab), and Ricky Kamins (owner of Liberty Cab). I’m thinking she might be a No vote on Uber.

Robert Gallegos – $4,539.72 in kind from TOP PAC, $1,500 from Teamsters Local $988, $1,000 from Plumbers Local Union No 68, $500 from LAN-PAC, $500 from Linebarger Goggan Blair & Sampson, LLP, $1,000 from Pipefitters Local 211, $2,500 from HPCP Investments LLC, and $1,500 from Houston Dock and Marine Council PAC Fund. He also received $4,400 from Peter Brown, and $225 in kind from Sen. Sylvia Garcia.

You may be wondering why I highlighted donations from people associated with the payday lenders. Isn’t that supposed to come up for a vote with this Council? Well, maybe and maybe not. And maybe the votes on Council will be according to the contributions, and maybe not. But at least now you know.

Council hears the Mayor’s payday lending ordinance

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.

More on the Mayor’s payday lending ordinance

From the Chron story on Mayor Parker’s proposed payday lending ordinance, which is described as having been toughened up from an earlier proposal:

Mayor Annise Parker

Mayor Annise Parker

Consumer groups had called [City Attorney David] Feldman’s compromise proposal too weak; he said he preferred tougher restrictions but said those were unlikely to pass the Legislature, would invite a lawsuit, and could force lenders outside city limits, hurting borrowers’ access to credit.

That was the concern for members of the Freedmen’s Town Association who attended Friday’s news conference, one of whom grumbled, “Yes you are,” when Parker said, “We’re not trying to put payday lenders out of business.”

LoneStar Title Loans has given the Freedmen’s Town group almost $300,000 over the last six years, board member John Fenley said.

No one would use payday lenders if banks, nonprofits or churches would offer them low-interest loans, association volunteer Ayanna Mitchell said.

“When they run these industries out of the communities, where are they going to get the money from?” she said. “People are going to get the money they need whether they go to a title lender or they go around the corner and get it from somebody who’s not regulated at all, who, instead of taking your car, will do other things to you.”

I understand the concern about access to credit, but the solution isn’t payday lenders and their usury. The solution is making affordable financing more widely available in places and communities where it currently isn’t. That’s not something the city of Houston can do, but putting a tighter leash on payday lenders is. It’s a matter of consumer protection, and it’s about time we had it in Houston. Payday lenders have a deserved reputation for being predatory, and state laws regulating them, even after a bill was passed in the 2011 session, are notoriously lax. Frankly, if the industry doesn’t like what the cities are doing to curb their excesses and protect their residents, they should have worked with Sen. Wendy Davis, Rep. Tom Craddick, and other members of the Legislature that were trying to pass reasonable reforms instead of impeding and obstructing them every step of the way. I have no sympathy for them at all. The Observer and BOR have more.

The Mayor’s payday lending proposal

Mayor Parker sure isn’t wasting any time on her last-term agenda. Next up on the list: the payday lending ordinance we’ve been waiting for.

Mayor Annise Parker

Mayor Annise Parker

With support from other major Texas cities and numerous advocacy groups, Mayor Annise Parker today unveiled proposed regulations for payday lending in Houston. The mayor’s plan establishes minimum business practices for payday lending institutions and mirrors ordinances previously adopted in Austin, Dallas, El Paso, San Antonio and several smaller Texas cities.

“I had initially favored a Houston-specific measure, but decided that joining with other Texas cities in a united front on this issue is the best way to send a strong message to the Texas legislature,” said Mayor Parker.  “Lenders deserve to make a profit on their investments, but not by charging astronomical interest rates to desperate consumers who have nowhere else to turn for emergency financial assistance.  The statewide model I am recommending for approval by Houston City Council achieves this balance.”

Payday and auto title loans are high cost, small-dollar loans offered to individuals without credit checks and little consideration for their ability to repay. The initial term is typically two weeks to one month, with the term usually determined based on the borrower’s pay cycle. A borrower who fails to make a payment on an auto title loan could wind up losing his means to get to work and take his children to school.

Under existing Texas law, there is no limit to the fees that payday lenders and auto title businesses can charge and no limit on the number of times they can charge high-fees for essentially the same loan – often trapping borrowers in a cycle of debt where they are never able to pay down the loan.  For example, a fast cash payday advance of $500 that is rolled over five or more times could wind up costing $1200 or more.

Houston’s proposed ordinance would help alleviate this problem by:

  • Requiring payday loan and auto title loan businesses to register with the city annually
  • Limiting payday loans to 20 percent of the borrower’s gross monthly income
  • Limiting auto title loans to three percent of the borrower’s gross annual income or 70 percent of the vehicle value, whichever is less
  • Limiting single payment loans to no more than three refinances or rollovers and installment loans to no more than four installments
  • Requiring each installment, refinance, or rollover payment to reduce the total principal owed by at least 25 percent
  • Defining a rollover or renewal as a loan within seven days of the previous loan
  • Requiring loan agreements to be written in easy-to-understand language
  • Requiring contact information for nonprofits offering financial literacy and cash assistance

Mayor Parker’s recommendation is endorsed by the following members of the Houston Fair Lending Alliance:

AARP
Catholic Charities of the Archdiocese of Galveston-Houston
Covenant Community Capital
Christian Life Commission
Family Services of Greater Houston
Neighborhood Centers, Inc.
Skills for Living
Texas Appleseed
Texas Catholic Conference
One Voice Texas
United Way of Greater Houston

Houston City Council will be briefed on the mayor’s proposal December 4, 2013.  The first opportunity for a vote by council will be on December 11, 2013.

See here, here, and here for the background. Following the approach taken by other cities is a good idea, as it gives the city some cover from litigation. The Mayor has an impressive list of community supporters behind her – a press release from Sen. Sylvia Garcia praising the ordinance hit my inbox less than an hour after the Mayor’s press release – but it remains to be seen how the ordinance will be received by Council. I expect some pushback, but in the end I expect it to pass. After that, it will be a matter of hoping that neither the courts nor the Legislature do anything to screw it up, and hopefully someday moving the ball forward at the state level. Let’s get this passed by Council first and we’ll go from there. Stace and Texpatriate have more.

What’s on the agenda for Mayor Parker in her third term

Now that Mayor Parker has been safely re-elected, with a better-than-expected margin, what does she plan to do from here?

Mayor Annise Parker

Mayor Annise Parker

A triumphant Parker on Tuesday lauded her “decisive” victory but quickly shifted her focus to the coming two years, listing her third-term priorities as jobs, economic development, rebuilding streets and drainage, and financial accountability.

“There are no quick fixes. We’re rebuilding Houston for the decades, and we’re doing it right,” she said. “My election is over, but the work is going to get much tougher. … The next two years starts tonight.”

Parker had said for weeks she expected to avoid a runoff, and lately has acted the part, saying Monday she intended immediately to place controversial items before the City Council.

An ordinance targeting wage theft should be on the Nov. 13 agenda, she said, with a measure restricting payday and auto title lenders shortly to follow. Both items were discussed by council committees earlier this year before disappearing in favor of bland agendas during the campaign.

The council also should vote on a controversial item rewriting regulations for food trucks before year’s end, Parker said.

She said she also wants to pass a nondiscrimination ordinance similar to an item recently passed in San Antonio that prohibited bias against gay and transgender residents in city employment, contracting and appointments, and in housing and places of public accommodation.

Parker also has said she wants to expand curbside recycling service to every home in Houston, to finish an effort to reduce chronic homelessness, and to give Houston voters a chance to change the city’s term-limits structure, likely from three two-year terms to two four-year terms. She singled out homelessness and the Bayou Greenways initiative, a voter-approved effort to string trails along all the city’s bayous, Tuesday night.

Parker also has highlighted pending projects: the city is halfway through moving its crime lab from the Houston Police Department to an independent lab; voters’ narrow approval of a joint city-county inmate processing center on Tuesday will let the city shutter its two aging jails.

The mayor twice has failed to persuade the Texas Legislature to give her local negotiating authority with the city’s firefighter pension system; she will get another crack at it in 2015.

Another reform Parker said she wants to tackle is increasing water conservation in Houston, saying “we are one of the most profligate users of water of any city in Texas, and that has to change.”

A lot of this should be familiar. The wage theft ordinance was brought up in August to a skeptical Council committee, and the Mayor promised to bring it up on October 23. Payday lending is a to do items due to legislative inaction. The call for a more comprehensive non-discrimination ordinance was a recent addition that came in the wake of San Antonio passing its more muscular NDO. The crime lab and closure of the city jails are long-term projects that will move forward. It will be interesting to see where Council is on some of these, and it may be better for a couple of them to wait until the runoffs resolve themselves and bring them up next year. Finally, on the subject of water usage, there’s a lot we could do to affect that.

The one cautionary note I would strike is on term limits. You know how I feel about term limits, so I’m not going to go into that. My concern is that this necessarily means a change to the city charter, and that implies the possibility of a larger can of worms being opened. Which, maybe Mayor Parker would welcome, I don’t know. I personally have a hard time shaking the feeling that the goal of this exercise is to curtail the power of the Mayor one way or another – I have a hard time seeing us move to a City Manager form of government, but things like giving Council members the power to propose agenda items are in play. Which, again, may be something the Mayor wants to discuss, and even if it isn’t may be a good thing for the rest of us to talk about. I’ve said I’m open to the conversation, and I am. Doesn’t mean I’m not thinking about the possible ways it could go.

One more thing:

Parker said Tuesday she would not be a candidate for any office in 2016.

That was made in the context of speculation that the Mayor’s current agenda for Council might presage a run for statewide office. I don’t know what the Mayor’s plans are for life post-Mayorship, but I can say with a reasonable degree of confidence that of course she wouldn’t be a candidate for office in 2016. What office would she run for? The only statewide positions are Railroad Commissioner and judicial seats, and unless she wants to move out west and run against Steve Radack, the only county office that might fit would be Tax Assessor. The question to ask is whether she might be a candidate for office in 2018, and even I would have to admit that’s way too far off to really care about right now. Let’s see how these next two years go, and we’ll figure it out from there.

The cities versus the payday lenders

The Observer writes about representatives from Texas cities getting together to talk about how to fight the scourge of payday lenders.

The conference panel on Thursday was an opportunity for city officials from around the state to share advice and encouragement. The panel included Austin City Councilman Bill Spelman and legal advisors from Austin, Denton and El Paso, three cities that have enacted tough payday lending rules and faced legal action from the industry.

Jerry Drake, a deputy city attorney from the city of Denton, reminded cities not to enact the ordinance without being able to clearly demonstrate a governmental need to restrict short-term lending.

“I just want to add a word for cities that are considering this: Be sure not to take the harm as a given. These payday lenders fully believe they’re doing the Lord’s work,” he said. “They say they’re filling a need. They have studies they’ll give you from economists with all kinds of very high-powered economic formulas in them, that you can’t even begin to parse, saying that the industry is such a good thing for the community and people of modest means.” Do your homework, he said, and come prepared.

But another message came from the panel, and advocates in the crowd — the more cities that enact payday ordinances, the better protected they’ll all be.

“From the payday lender’s point of view, suing Dallas is a no-brainer. It’s going to be easier for them to carry the cost of that lawsuit than the city of Dallas,” said Austin City Councilman Spelman. “But if 10 or 20 or 30 cities that are all passing the same ordinance, and they want to sue all of us, that’s a whole bunch of money. They’re going to throw in the towel and wait for one or two of those lawsuits to bear fruit.”

[…]

Spelman expressed optimism that the panel would encourage smaller cities to enact the ordinance. He told one story about the Austin ordinance he helped pioneer. A woman who had taken on short-term loans came to the city with concerns about her contract, and the lender responded by reassigning her contract to a storefront in Buda, outside of Austin’s city limits. After the panel, Spelman said, officials from Buda contacted him to talk about enacting an ordinance.

“Of course, if they do that, [the company] will move it to Pflugerville or Cedar Park instead,” Spelman said. “But, I think there are a lot of other cities that will adopt similar ordinances. At some point, I think, we’ll have sufficient coverage over the entire state that the Legislature is going to have to adopt the same level of statute.”

Houston wasn’t among the cities at that panel discussion, as our city wanted to wait to see what the Lege would do before taking action on its own proposed regulations. Mayor Parker has been talking about bringing it up now that the Lege has failed again to do anything about the problem, and if she is re-elected I fully expect it to be on Council’s agenda. I think the cities are doing what they can, and in the absence of any leadership from the state it’s certainly better than nothing. But despite CM Spelman’s optimism, it really won’t be adequate coverage. I mean, something like 1.7 million people live in unincorporated Harris County alone, and nothing can be done where they live without the Legislature’s say so. I do hope that if enough cities do something that the Lege will eventually be forced to act, but as we saw last session that ain’t necessarily a good thing. I do believe that a good payday lending bill is possible – there is bipartisan and grassroots support for it – but it’s never easy to overcome a single-purpose and well-funded interest. Keeping pressure on all fronts is the best we can do for now.

One thing Wal-Mart could be good for

They could wreak havoc on payday lenders.

Raj Date says that with modern data analysis banks could offer payday loans on much less extortionate terms. Felix Salmon retorts that banks don’t actually want to do business with poor people unless they can scrape them for high fees. Otherwise the costs of dealing with the accounts exceeds the profits to be made by having them as customers.

The solution to this problem, I think, would be for banking services to be performed by a firm that already has low-income clients and would have an interest in increasing its level of engagement with them even if the payday lending operation wasn’t profitable per se. In a word, you need Wal-Mart. A few years back, Wal-Mart started offering check-cashing services that were much cheaper than the prices charged by stand-alone check-cashing places. And it’s no surprise that this worked. If your whole business is cashing checks, then your check-cashing fees have to be high. But if check cashing is basically just another way to get people in the door of your store, then it makes business sense to offer attractive terms. Wal-Mart once applied for a banking license and was turned down so it can’t lend money. But if low-end retail chains were allowed to get bank charters, you could imagine one or more of them wanting to offer discount payday lending services for similar reasons—it’s a great way to get customers in the door at a time when you know they have money to spend.

The embedded link about Wal-Mart in the check cashing business is worth reading. For that and for the payday lending industry, having WalMart come in and crush the existing players with the force of low prices would be a good thing. Frankly, letting Wal-Mart have a banking license, which would immediately give access to basic checking and savings account services for millions of adults that don’t currently have them. That could have a major effect right here in Houston.

The Houston area is now the sixth-most unbanked major metropolitan statistical area in the country, as 11.9 percent, or 264,000 households in the region, do not have access to a bank account, according to the Federal Deposit Insurance Corp. About 8.2 percent of U.S. households are unbanked.

It’s also the fifth-most underbanked major metro in the U.S., meaning the 28.4 percent, or 630,000 households, that fall into this category have bank accounts but rely heavily on alternative financial products, such as payday lending.

Even after the city of Houston in 2009 established Bank on Houston, a program to draw the unbanked to bank accounts, the numbers of the city’s unbanked and underbanked have increased. In 2009, when Houston was the seventh-most unbanked metro area in the U.S., 10.5 percent of the city’s households were unbanked and 21.4 percent were underbanked.

“Part of it is the population increase,” Alexander Obregon, special projects coordinator for the city controller’s office and chair of the financial education committee for Bank on Houston. “There aren’t enough service providers out there that can reach all the people who need a financial education. Houston’s population continues to grow, and demand for its safety-net services continues to grow,” outpacing the growth of those services, he said.

Roger Widmeyer, spokesman for the Houston controller’s office, added that the unbanked can be a challenging demographic group to draw to the financial services industry, as many have a generational or cultural distrust of banks.

“Houston is a mecca for skilled labor, and many of these folks get paid in cash, and they prefer it that way,” Widmeyer said. “We’re attracting a lot of new residents who are coming here without a bank.”

I’m willing to bet that if Bank On Houston could partner with Wal-Mart, that would make a major dent in those numbers. Hey, I dislike and distrust Wal-Mart as much as the next liberal do-gooder. No question, Wal-Mart is evil. Compared to the payday lending industry, though, they’re clearly the lesser evil. I’m not particularly sanguine about a legislative fix for payday lending, and while the city of Houston is likely to take action to restrict payday lending here, that can only cover the city. Bigger action than that is needed. I say let WalMart come in and squeeze all the profit out of payday lending. That’s one industry where there’s no downside to lower prices.

What we missed by not getting a payday lending bill

Better Texas Blog reminds us of what could have been

SB 1247, the omnibus reform bill filed by Sen. John Carona … included the ability to repay standards, loan limits, and refinance limitations, among numerous other provisions. According to the Office of Consumer Credit Commissioner (OCCC), the refinance limitations alone in SB 1247 would have produced annual savings more than $130 million for more than 300,000 Texas consumers.

Unlike other consumer loan products offered in Texas, the Finance Code contains no payday loan regulation relating to loan fees or effective annual interest rates, loan amounts, maximum number of refinances per loan, loan terms[i], ability to repay or underwriting and type of product. At least for payday loans, the absence of any statewide regulation or consumer protection makes Texas an outlier compared to nearly every state that permits or authorizes payday lending. Only five other states do not cap the amount of fees payday lenders can charge (Delaware, Idaho, Nevada, Ohio and South Dakota).[ii] Even among these states however, Delaware and Nevada have limits on loan terms and all five states limit loan amounts. [iii]

recent analysis of payday lending conducted by the Consumer Financial Protection Bureau (CFPB), which covers a majority of the U.S. storefront payday loan transactions over a 12-month period, found that 68 percent of payday loan consumers had annual incomes at or below $30,000, and 43 percent had annual incomes at or below $20,000. The median annual income of payday loan consumers was about $22,500; for borrowers making under $20,000, the most common income sources were “public assistance/benefits” and “retirement”.

The CFPB analysis also found that the average payday loan amount nationwide was $392 in 2012. Nationwide data on payday lending appear to be much better than comparable data from unregulated Texas payday lenders, which reveal that Texas borrowers pay much higher fees and loan amounts. Based on 2012 data from OCCC, the average single payment payday loan in Texas was $472.

SB 1247 also included limits on refinances for each loan product, generating a pathway out of debt for consumers who get into trouble with payday or auto title loans. For 2012, single payment payday loans alone comprised about 75 percent of all payday loans, while single payment auto title loans accounted for 83% of all auto title loans.[iv] The original loan amounts of single payment payday loans surpassed $1 billion, while loan refinancing nearly hit $2.1 billion. Over 70 percent of single payment payday loan consumers that refinanced their loan did so multiple times. As shown by the CFPB report, repeat borrowing and renewals represent the lion’s share of all loan volume.   On-time repayment is the exception, with three refinances for every loan paid in full on the original due date.

The good news and the bad news is that city ordinances are still in effect. It’s good news because we almost got an bill that did little more than nullify the city ordinances, and it’s bad because city ordinances only cover a portion of the state. Given what Mayor Parker has said, we will likely be able to add Houston to the list of cities that offer this protection. But until we have a real statewide law, it only means so much.

Less is more, local legislative edition

Harris County and the city of Houston generally play more defense than offense when the Legislature is in session, so as a rule the fewer bills that get passed that affect them, the better.

Mayor Annise Parker

Mayor Annise Parker

County and city lobbyists said their efforts to scuttle unfunded mandates and bills that would have handcuffed local governments’ powers largely had succeeded.

On a broader level, however, Mayor Annise Parker and County Judge Ed Emmett were disappointed that some of their top priorities stalled.

“When we go to Austin, our goal is generally to play defense to keep things from happening that would have major consequences for Houston taxpayers, but we also try to promote a limited city agenda,” Parker said. “We made progress on some small pieces of legislation. Would I characterize it as a horrible session? No. A horrible session is when they do something really stupid to you, and there were some really stupid bills that we jumped on.”

Most notably, bills to cap local government revenues did not succeed, said the Texas Municipal League’s Bennett Sandlin and Texas Association of Counties’ Lonnie Hunt.

“Our mantra, more or less, is local control,” Hunt said.

[…]

Judge Ed Emmett

Judge Ed Emmett

Emmett said he was disappointed, but not surprised, the Legislature failed to expand Medicaid under the federal Affordable Care Act. He also decried a lack of progress on transportation.

“That’s the biggest worry we have, because if we’re going to realize our economic potential and our growth potential, we’re going to have to have transportation, and right now it’s not there,” he said.

Emmett and [Rep. Garnet] Coleman cheered large increases in mental health funding compared to the last biennial budget, including a $10 million pilot program to divert the mentally ill from the Harris County jail.

Given the Legislature’s “disgraceful” failure to restrict payday lending, or to ban texting while driving, Parker said she will move forward with local ordinances.

Parker echoed Emmett’s disappointment at the Legislature’s progress on big issues, ticking off education, transportation, immigration and pensions as areas in which she said there had been insufficient progress.

“It’s always a success for a city when the Legislature doesn’t do anything to harm that city,” she said, “but in terms of the major issues confronting our state … you can’t say this was a successful Legislative session.”

Given that at one point, the payday lending bill would have done little more than nullify local ordinances, failure to do anything wasn’t as bad as it could have been. Mayor Parker wanted to wait and see what the Lege would do before acting locally on the issue, so I’m glad to see her bring it up again. We did get the bike trail bill, which was very nice, and there was something in there about a bill to allow county clerks to accept financial disclosure forms and campaign finance reports electronically, which would be awesome if it leads to a makeover for the crappy interface we have now. Death to scanned PDFs, I say! We didn’t get Medicaid expansion, but we did at least get that.

Payday lending prospects look grim in the House

From the Observer:

Late into the night on Monday, the payday loan industry strutted its stuff before a very friendly House committee. The hearing came just a week after the Senate passed a surprisingly tough bill that the industry insists would shut down most of Texas’ 3,400 payday and auto-title storefronts. Even though the legislation aired last night is a faint shadow of the Senate bill, it got a rough treatment from six of the seven committee members.

Only the chairman and author of the bill, Rep. Mike Villarreal (D-San Antonio) evidenced any interest in cracking down on the industry.

“I think the tone of the committee was that clearly there was no support for what Villarreal put out there, at least right now,” said Ann Baddour of Texas Appleseed.

What happens next is anyone’s guess but it is possible that payday reform is dead for the session.

[…]

Villarreal’s bill is considered by consumer groups to be a minimalist reform effort. The Senate version would close a loophole that allows payday and title lenders to get around Texas’ anti-usury laws and charge unlimited rates. Instead it would impose a strict 36 percent APR cap on loans, effectively scuttling the business model in Texas. The Villarreal proposal, which focuses on limiting the number of “rollovers” and imposes modest limits on the size of loans based on borrower income, has only received tepid support from consumer groups.

The wording here is a little confusing. Rep. Villarreal has his own bill, HB2706, which was heard in committee on April 22 and which is pending in committee. I believe this bill is similar to the pre-amendment version of Sen. Carona bill, which is SB1247. That now-tougher bill, which passed the Senate last week, is what Rep. Villarreal brought up in committee this Monday. Rep. Villarreal is the chair of the Investments & Financial Services committee, but only one other member of the committee is a Democrat, and two of the Republicans are quoted in the story giving rhetorical foot massages to the payday lenders and the curious notion that their lightly regulated existence is necessary for truth, justice, and the American way. As the man said, you don’t need to be a weatherman to know which way the wind blows.

What happens next is impossible to predict but billions in revenues hang in the balance.

Daniel Freehan, the CEO of Cash America International, acknowledged as much on a conference call with analysts last week.

“Dozens of different scenarios could unfold at this point that run the gamut of this bill never getting out of the House committee, to a bill that passes the House in identical form of Senate Bill 1247. In between these two extremes are multiple permutations that could develop, and it’s impossible to predict how this may unfold with any reasonable degree of confidence.”

A worst-case scenario from the point of view of the reformers is legislation that would strike down city ordinances but not add any new statewide regulations. One such pre-emption only bill, House Bill 2953 by Rep. Ryan Guillen (D-Rio Grande City), is already headed to the House floor.

Last night, Rob Norcross of the Consumer Services Alliance of Texas, a group that represents 80 percent of all the payday and title storefronts in Texas, tried to play down the pre-emption issue, saying that he believed the industry would prevail in its court. But there’s no doubt that ordinances passed in Austin, Dallas, San Antonio, El Paso and Denton are cutting into profits. In January, Mark Kuchenrithe, the CFO of Austin-based EZCorp, told analysts that the company’s “profitability… was negatively impacted by over $1 million” during the last quarter of 2012 “as a result of ordinances enacted in Dallas and Austin.”

Here’s HB2953. Far better that nothing passes than this does. I’m okay with rolling the dice in the courts if it comes down to it. BOR has more.

UPDATE: The Trib adds on.

Improved payday lending bill passes the Senate

Good news, if it goes anywhere.

The Texas Senate approved a bill to regulate short-term lenders on Monday night, a milestone some thought the chamber wouldn’t reach after a personal and divisive floor fight on Thursday.

But with the measure’s author, state Sen. John Carona, R-Dallas, calling the highly-altered bill an “ugly baby,” it remains to be seen whether the measure is viable enough to get through the House.

The bill passed with versions of the six amendments Carona brought with him to the floor last week – but seven other amendments got tacked onto the bill, including one from state Sen. Wendy Davis, D-Fort Worth, which would bring payday lenders back under the control of existing small-loan regulations.

That provision is similar to one in a bill state Rep. Tom Craddick, R-Midland, introduced, which was lauded by consumer advocates but has long been seen as politically troublesome.

Another potential poison pill comes in the form of an amendment from state Sen. John Whitmire, D-Houston, which prevents state regulation of payday lenders from preempting local regulations. Previously, the bill established a statewide minimum level of regulation and preempted local ordinances regulating short-term lenders.

The statewide regulations and preemption were welcomed by payday lenders, who were willing to negotiate certain reforms in return for the expectation that they would be operating under uniform rules. With that provision gone, it remains to be seen whether the two sides can come together to reach an agreement. Carona acknowledged as much on the Senate floor.

“This has the effect, I think,” he told Whitmire, “of perhaps not leaving us any hope of passage.”

Whitmire, for his part, seemed to doubt that the amendments would survive the House, leaving it with no hope of passage later when it returns to the Senate.

“What are the odds,” he asked, that “the House returns your bill with these amendments? This ain’t my first rodeo.”

See here, here, and here for some background. The Observer calls the bill “surprisingly tough”, and it’s certainly a pleasant surprise. The Chron adds a few more details.

Another amendment, by Sen. Rodney Ellis, D-Houston, capped annual percentage rates at 36 percent for all borrowers – the amount lenders are allowed to charge military families.

The bill prohibits lenders from extending more than one payday or auto title loan to the same borrower at one time, limits the number of times the loan could be refinanced, and mandates that lenders must permit partial payments so that borrowers can reduce the size of their loans.

Pointing out the industry’s strength, Sen. Wendy Davis, D-Fort Worth, said that there are more payday lending storefronts in Texas than Whataburger and McDonald locations. “We’ve heard many, many stories about lives that have been ruined as a consequence of this state’s failure to appropriately regulate this industry so that consumers are treated fairly,” she said.

I have to say, after all the twists and turns this bill took, I did not expect this result. Kudos to Sens. Whitmire, Ellis, and Davis for strengthening the bill, and to Sen. Carona for not standing in the way. Maybe this means the bill now has no chance of passing the House, but maybe the House will take a cue from the Senate’s insistence on passing meaningful reform. I choose to be hopeful, as foolish as that often is with the Legislature. EoW has more.

Division over the payday loan bill

Quite a heated little fight in the Senate yesterday.

An ugly scene erupted in the Texas Senate today, with Sen. John Carona (R-Dallas) suggesting that some of his Republican colleagues were “shills” for the payday loan industry and worrying that the GOP would be seen as “the party that is backed and bankrolled by payday lenders.”

After intense negotiations this week, Carona told lawmakers he had struck a deal to pass legislation to reform payday and auto-title lending in Texas. Most of the consumer groups, the cities, Senate Democrats and even the payday loan industry were on board with the “hard-fought compromise,” he said.

“There have been great concessions on both sides,” Carona said. “We can leave this chamber at the end of May and honestly say we made a significant incremental step forward on protecting consumers.”

However, as Carona moved toward a suspension of the rule to bring the bill up for debate, which requires two-thirds of the Senate, he complained that payday-loan lobbyists were calling senators on the Senate floor and asking them to change their votes. He even hinted that two GOP senators were acting as agents for the industry.

“If we don’t do it this time, you won’t be able to regulate this industry two years from now,” he said. “This industry will be so much wealthier, so much more politically powerful that you won’t be able to say no and you won’t be able to draw the line. I know the lobbyists are just in a frenzy right now to try to stir up some action on the floor and get one or two of my colleagues who seem to be working the floor to change their vote.”

Sen. Carona wound up pulling the bill down. The Trib adds some details.

Carona, who said the bill had been “negotiated literally through the night,” brought with him to the floor six amendments that were intended to address the concerns of some consumer advocates who said the bill didn’t go far enough in limiting the abilities of short-term lenders.

Ultimately, the bill was pulled before debate on the amendments began, but Carona said they mostly contained ways to strengthen consumer protections, including limiting the types of loans that short-term lenders could offer, mandating that lenders accept partial payments, and limiting the maximum duration of multiple-payment loans — a major sticking point for consumer advocates.

“There are only two or three amendments that the industry really finds objectionable,” he said, “and in that case, all we’re asking the chamber to do is do what’s right for consumers.”

Early in the debate, state Sen. Kirk Watson, D-Austin, said many senators’ support for the measure would depend on the inclusion of those six amendments in the final bill.

“I think that there will be an effort to stop 16 people from voting for any conference committee report that strips those out,” he said, referring to the version of the bill that could emerge from a future House vote.

But some senators, who had previously expressed their intent to vote for the bill that emerged from committee, balked at the proposed changes. In an argument about process that turned personal, critics of the bill took issue with the way Carona brought his amendments to the floor.

Leading the criticism was state Sen. Troy Fraser, R-Horseshoe Bay, who charged that Carona hadn’t given the chamber enough time to review the proposed changes. While calling payday lending reform a “difficult issue,” he asked Carona if he had sent the amendments around 24 hours in advance. Carona’s reply was sharp.

“No, sir,” he said. “And, frankly, I haven’t seen you do that with your bills.”

[…]

Fraser was joined in his criticism by Sen. John Whitmire, D-Houston, who also argued that the legislative process should be slowed down to give senators time to consider prospective amendments, adding that he had concerns about Houston’s ability to regulate payday lending under the bill.

“What’s the rush?” Whitmire asked Carona.

Because “the industry has hired damn near every lobbyist in town to kill this bill,” Carona replied.

When Carona replied that he had been in constant contact with the city of Houston to determine its position on the bill, Whitmire erupted, telling Carona that he would represent his own constituents. He again criticized Corona for rushing the process.

“When you were negotiating this most recent agreement, I was chairing [Senate] Criminal Justice for four hours,” Whitmire said. “I think this has gotten totally out of control.”

The bill in question is SB 1247. Before this kerfuffle, the main divisions had been among consumer advocates.

Some progressive groups, including the Center for Public Policy Priorities and Texas Impact, have thrown their support behind the bill, arguing that it’s better than the status quo.

“For us, doing nothing is not an option this time around,” said Don Baylor, senior policy analyst at the Center for Public Policy Priorities. He points to estimates that limiting the number of times borrowers can “roll over” loans would save consumers at least $132 million.

“You get to a point where you ask yourself the question, Is there any more money [for consumers] left on the table? The folks that have decided to support it have decided there isn’t any more money on the table.”

Bee Moorhead, director of interfaith group Texas Impact, said that it’s important that legislators show the increasingly aggressive and powerful industry who’s boss.

“The thing that’s hard is that first step,” Moorhead said, “saying the state gets to decide under what terms you do business.”

Opposing the bill, however, are most Senate Democrats, the Texas Catholic Conference, Baptist organizations, Texas Appleseed and AARP.

They say that Carona’s approach falls short of meaningful reform and sanctions harmful new loan products.

“Our opposition is that this bill doesn’t do what it purports to do,” said Ann Baddour, with Austin-based group Texas Appleseed.

The pre-emption of local ordinances is the sticking point for many, myself included. It should be noted that there is a decent argument for proceeding anyway, as articulated in the Chron.

The bill has split the community of nonprofits that lobby legislation affecting the poor. Favoring it are the Center for Public Policy Priorities, Goodwill Industries and Texas Impact, whose leaders believe it provides a pragmatic system of statewide regulation.

While it pre-empts the stronger city ordinances, they believe lenders simply are directing borrowers to suburban locations outside the reach of city enforcement.

The industry has launched legal challenges to those ordinances that probably will be resolved by the conservative Texas Supreme Court, said Scott McCown, executive director of the public policy center. “Do we really think that if the ordinances are challenged, the Texas Supreme Court is going to say they are valid and enforceable?” he asked.

McCown also said most cities do not have the “economic wherewithal” to enforce the ordinances. While he would like the bill to be stronger, McCown said, “our assessment is that this was the best we could do.”

[…]

Carona’s bill would limit the number of times lenders could “roll over” a loan and charge new fees. That provision would save Texas consumers at least $132 million a year, according to an analysis by the Texas Consumer Credit Commission.

[Rob] Norcross said [the payday lending group Consumer Service Alliance of Texas] agreed to it in response to the plethora of city ordinances and the burden that dealing with so many different laws creates for business. “If anybody thinks anybody (in the industry) is happy, they are wrong,” he said. “This is a high price to pay.”

I’m a half-a-loaf guy and I get where McCown and Moorhead are coming from. I’m still reluctant to support this thing, though perhaps I’d feel better once I knew what the amendments that never got to be debated are about. The Observer indicated that Carona may bring the bill back on Monday, though the Trib suggested it could be longer than that. I don’t know what to think at this point, other than to marvel once again at how sleazy the payday lending industry is. Trail Blazers has more.

Somewhat improved payday lending bill passes Senate committee

I still don’t think it’s good enough.

Breathing new life into a proposal that was doomed by the opposition of consumer groups only last week, a Texas Senate committee approved strengthened legislation Tuesday that imposes restrictions on the payday loan industry that could save desperate Texas consumers some $220 million a year.

Sen. John Carona, R-Dallas, said his proposal would end the cycle of debt that entraps thousands of Texans each year by curtailing the kinds of credit products offered, limiting loan amounts based on a borrower’s income and capping the number of times a loan can be refinanced.

Acknowledging that some consumer groups still opposed the bill as insufficiently restrictive, Carona cautioned that a politically powerful industry would kill legislation that reached too far. “In the eyes of none of you is this a perfect bill,” he said at a Senate Business and Commerce Committee hearing Tuesday. “But this is the only version that will pass this session. I am convinced the industry has given as far as it intends to go.”

Carona noted that according to the state’s consumer credit commissioner, the bill’s provisions would limit extensions of loans, saving Texas borrowers as much as $221 million a year. “If that’s not progress, then I am not sure what progress is,” he said.

Only last week the proposal appeared dead when every consumer group involved in negotiations testified against it. On Tuesday, however, representatives of Texas Impact, the Center for Public Policy Priorities and Goodwill Industries gave their blessings. “This will meaningfully benefit more than 300,000 borrowers and will save real money,” said Bee Moorhead of Texas Impact.

See here and here for the background. The bill in question is SB1247. Rep. Mike Villarreal says he is now prepared to move forward with his companion bill after Sen. Carona’s modifications. Others, such as the AARP, Texas Appleseed, and Sen. Letitia Van de Putte, who cast the sole No vote in committee, remain opposed. The modified bill still preempts local ordinances, which to me is a deal-breaker. I believe cities should not be prevented from addressing whatever shortcomings they see in the statewide regulations on these parasites. Until that provision is taken out, I can’t support this bill.