Austin City Council May Regulate Payday Loans Within the City
Proposal Would Force Payday Lender Registration and Maximum Interest Caps
by Kevin Schneider on August 15, 2011
City council member Bill Spelman has sought support for two proposals which would enforce stricter regulation of the payday loan industry within the city limits. The measures would also add further regulation to car title loans. The move comes as a reaction to what Spelman says are predatory lending habits which keep people in debt.
If passed, the exact terms of the proposals would:
- Limit borrowers from getting loans greater than 20 percent of their monthly income.
- Bar consumers from refinancing their loan more than 3 times.
- Restrict payday lenders from opening locations within 1,000 feet of each other or 200 feet from a residential lot.
- Car title loans would not be able to be greater than 3 percent of a borrower’s gross annual income or 70 percent of the market value of the car used as collateral for the loan.
While the state of Texas does regulate the payday industry, some cities like Austin and, Dallas as well, have decided to apply further measures.
According to Michelle Rodriguez, executive director of Catholic Charities, an agency providing financial assistance to low-income families, the problem with payday loans lies in education of borrowers. “The sad reality is, payday loans are just a Band-Aid,” she said.
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