Fort Worth is state’s big­gest city not reg­u­lat­ing pay­day loans

Star-Telegram (Sunday) - - Front Page - BY LUKE RANKER [email protected]­gram.com

Re­becca An­thony needed a lit­tle help putting food on the ta­ble.

She’d al­ready re­ceived as­sis­tance from a church and friends, but it wasn’t enough to put whole meals to­gether for her mother, two daugh­ters and boyfriend, she said. So last month she went to an ACE Cash Ex­press, a pay­day loan store, for $490. That small loan will cost her about $1,700, she said, by the time she’s done pay­ing fees, in­ter­est and the prin­ci­pal.

“We pretty much had no food in the house. We wanted to just get a lit­tle but, but we also wanted to be able fin­ish pay­ing our bills,” she said. “We ended up get­ting a lit­tle over our heads, I think.”

The loan was the third she has taken out this year. The other two – $1,000 in Jan­uary to make ends meet af­ter her mom lost her job and $600 in April to help buy a car that she later couldn’t af­ford – came from on­line pay­day loan firms. She ex­pects to pay about $5,000 for the just over $2,000 she ini­tially needed.

With a pay­day loan, bor­row­ers take out a short-term loan for gen­er­ally less than $500, with pay­ment due on the bor­rower’s next pay­day. De­pend­ing on the lender, bor­row­ers pay a fee, about $10 to $30 for ev­ery $100 bor­rowed. If the loan is rolled over or re­newed, fees are charged again. Texas doesn’t limit fees.

Fort Worth re­mains the last ma­jor Texas city without reg­u­la­tion or zon­ing for pay­day lend­ing store­fronts, of­ten called credit ac­cess busi­nesses, like the one in Bed­ford where An­thony bor­rowed $490. State reg­u­la­tion re­quires li­cens­ing, data col­lec­tion and le­gal dis­clo­sures, but laws ad­dress­ing the cy­cle of debt fac­ing peo­ple like An­thony have fallen apart in the leg­isla­tive ses­sion.

These loans are at­trac­tive to those with low in­come and those who strug­gle to get credit through tra­di­tional means. That’s the same pop­u­la­tion at risk of be­ing caught in a cy­cle of debt, said Ann Bad­dour, with the Austin-based non­profit Texas Ap­ple­seed.

Bad­dour said the loans “feed off des­per­a­tion.”

“It’s ex­pand­ing into the mid­dle class – teach­ers, stu­dents, those with tem­po­rary job loss,” Bad­dour said. “It was al­ready a prob­lem but it’s get­ting big­ger.”

Rep­re­sen­ta­tives of the pay­day loan in­dus­try say the loans pro­vide needed cash to an un­de­served pop­u­la­tion, and tougher reg­u­la­tion only hurts low­in­come fam­i­lies.

“These or­di­nances limit ac­cess to credit to those who need it,” said Rob Nor­cross, spokesman for the Con­sumer Ser­vice Al­liance of Texas.

PAY­DAY LOANS IN TEXAS

In Texas, the pay­day loan store­front acts as a bro­ker be­tween the bor­rower and an out-of-state bank. Taxas laws pre­vent bor­row­ers from pay­ing more than 10 per­cent to the third party, but a loop­hole al­lows the pay­day lender to charge un­capped rates and fees. Texas is now the only state with this loop­hole, Bad­dour said.

“Texas is be­com­ing more and more an out­lier across the coun­try in terms of pay­day loan over­sight,” she said, call­ing Texas “a black hole.”

Without statewide laws, it is up to mu­nic­i­pal­i­ties to regulate pay­day lend­ing, Bad­dour said.

In 2017, nearly 115,000 new pay­day or auto ti­tle loans were taken in the Fort Worth area, which in­cludes Ar­ling­ton, ac­cord­ing to the Texas Of­fice of Con­sumer Credit Com­mis­sioner. New loans that year were val­ued at nearly $121 mil­lion, down from about $189 mil­lion in 2014 when about 156,000 new loans were taken out.

The drop in pay­day lend­ing ac­tiv­ity around Fort Worth is likely the re­sult of neigh­bor­ing cities en­act­ing reg­u­la­tions, Bad­dour said. Ar­ling­ton passed an or­di­nance in 2015, with Hurst, Eu­less and Bed­ford fol­low­ing in 2016. Grand Prairie, Flower Mound and Weather­ford have or­di­nances, along with Austin, San Antonio, Hous­ton and El Paso.

Dal­las be­came the first Texas city to rein in such busi­nesses in 2011. The reg­u­la­tion cut the num­ber of pay­day loan store­fronts from 220 in 2011 to 65 in 2017, ac­cord­ing to the Dal­las Morn­ing News. The city was sued shortly af­ter the or­di­nance went into ef­fect. The or­di­nance made it up to the 5th U.S. Cir­cuit Court of Ap­peals, which let the city’s pay­day loan re­stric­tions stand.

Now, more than 40 cities have adopted busi­nesses reg­u­la­tions, 16 have en­acted zon­ing or land use re­stric­tions and six have done both to regulate pay­day lenders, ac­cord­ing to the Texas League of Mu­nic­i­pal­i­ties.

Fort Worth has been a hold­out in reg­u­lat­ing pay­day loans, but it’s not clear why, Coun­cil­woman Kelly Allen Gray said. Gray wants to see that changed, and when the city coun­cil meets again Dec. 4 she plans to dis­cuss what steps Fort Worth can take.

“We owe it to the ci­ti­zens of Fort Worth to have this con­ver­sa­tion,” Gray said, not­ing that she’s not yet sure what reg­u­la­tions the city should put in place. “For sin­gle par­ents, fam­i­lies liv­ing pay­check to pay­check, pay­day loans have been the an­swer, but what else can we do? We have to help them in ways that are not just rhetoric.”

FORT WORTH’S OP­TIONS

Most cities re­quire pay­day lenders to reg­is­ter with the city, limit the num­ber of pay­ments to four and limit the num­ber of times a loan may be re­newed or re­fi­nanced. Some or­di­nances clas­sify a new loan made within seven days of a pre­vi­ous loan be­ing paid off as a re­newal. In most cases, the busi­ness is re­quired to pro­vide credit coun­sel­ing in­for­ma­tion.

An­other op­tion is for the city to limit where pay­day loan stores can open through zon­ing and lan­duse per­mit­ting. Un­like busi­ness reg­u­la­tions, zon­ing would only im­pact fu­ture busi­nesses, not cur­rent store­fronts. Such zon­ing could limit store­fronts along ma­jor roads or in low-in­come ar­eas or bar mul­ti­ple stores from open­ing near each other.

Nor­cross said the pay­day loan in­dus­try doesn’t op­pose fair zon­ing, but draws the line with mu­nic­i­pal or­di­nances.

The in­dus­try ar­gues, he said, that reg­u­la­tion on the size of the loan or on how many in­stall­ments can be made wind up cost­ing peo­ple more. Bor­row­ers will sim­ply take out mul­ti­ple loans, drive to an­other city or bor­row on­line, which can carry higher in­ter­est rates and fees, he said.

At the state level, new bills are in­tro­duced each ses­sion re­gard­ing pay­day lend­ing that, if passed, may su­per­sede lo­cal reg­u­la­tion.

At least one city or­di­nance, Austin’s, is in the midst of lit­i­ga­tion.

Mean­while, the fed­eral Con­sumer Fi­nan­cial Pro­tec­tion Bureau is ex­pected to re­lease pay­day lend­ing rules next year.

“What the or­di­nance has done, iron­i­cally, is hurt those it’s de­signed to help,” Nor­cross said. “I don’t know why we’d want to pass an or­di­nance with these other things loom­ing.”

Gray said she would en­cour­age city staff to con­tinue re­search­ing op­tions, which could in­clude us­ing the League of Mu­nic­i­pal­i­ties model or draft­ing a spe­cific one for Fort Worth.

Re­gard­less, Gray said the coun­cil should also fo­cus on what can be done to help res­i­dents liv­ing pay­check to pay­check.

“We have to fig­ure out, if we’re say­ing no to pay­day loans, what are we putting in place to help work­ing fam­i­lies when they’re up against a wall?” she said.

HELP FOR THOSE IN NEED

For An­thony, who works in house­keep­ing at Texas Health HEB, the loans have crip­pled her fi­nances. Be­fore the ini­tial loan, she said she and her fam­ily had been sav­ing small amounts of money ev­ery month, but now they have pay­day loan bills on top of her stu­dent loans and tra­di­tional bills.

An­thony pays about $580 per month on her two out­stand­ing pay­day loans. With help from Catholic Char­i­ties, she’s hop­ing to pay off the re­main­ing bal­ance be­fore next spring. She also owes sev­eral thou­sand in stu­dent loans.

“We’ll make it work,” she said. “It’s go­ing to be hard. It’s harder now than it was be­fore I got the loans.”

The Catholic Dio­cese of Fort Worth, and other faith groups, have been at the fore­front of help­ing low-in­come fam­i­lies.

The church first no­ticed a cy­cle of debt from those they help about five years ago, said Jen­nifer Carr All­mon, the ex­ec­u­tive di­rec­tor of the Texas Con­fer­ence of Catholic Bish­ops. Peo­ple would seek as­sis­tance, ei­ther through the par­ish or from Catholic Char­i­ties, for any­where from $100 to $300 to cover bills while ow­ing $400 or more to a pay­day lender, she said.

A sur­vey around that time found a third of those the church aided needed mone­tary as­sis­tance at or greater than the amount they owed to a lender. Mil­lions of dol­lars have likely been drained from char­i­ta­ble or­ga­ni­za­tions help­ing peo­ple with pay­day loans.

“If they didn’t have the loans, they wouldn’t need our help,” she said. “If these loans are creat­ing a de­pen­dence on char­ity, we need to end it.”

An­thony said she re­grets the pay­day loans, but didn’t know where else to turn.

“Weigh your op­tions,” she said. “If you can get help any­where else, do it.”

MAX FAULKNER [email protected]­gram.com

Re­becca An­thony talks about the strug­gle to pay off her pay­day loans: “We ended up get­ting a lit­tle over our heads, I think.”

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