Austin City Council Member Bill Spelman introduced two items today that regulate the location and transactional operations of payday lenders in the City of Austin. Both will be considered at the August 18, 2011 City Council meeting. The first item will restrict new payday lending institutions from locating in certain neighborhoods, near major thoroughfares, or within close proximity to other payday lending institutions or residential areas. The second item will require payday lenders to register with the City of Austin, collect and maintain data on its operations, cap the maximum amount of a loan, and restrict the number of times a consumer can refinance a loan. Council Members Chris Riley and Mike Martinez are co-sponsors of the first item, and Mayor Pro Tem Sheryl Cole and Council Member Laura Morrison are co-sponsoring the second item.
“We have got to shatter the cycle of debt these small dollar lenders force their clients into,” Spelman said. “When Texans end up paying 500% interest on loans just to cover their basic living needs, there’s a problem that needs to be fixed. We asked the State of Texas to address this issue during the last legislative session, and thankfully they took an important first step. Now it’s up to the City Council to reach out as far as it can to help Austin residents trapped under a viciously deep and unfair pile of debt.”
The zoning regulations are modeled off of ordinances found in several cities across the State of Texas, including Dallas, Irving, Mesquite, and San Antonio. The operational regulations are based off of a recently adopted Dallas ordinance sponsored by Dallas Council Member Jerry R. Allen. Spelman and his staff worked with Allen and with policy advocates from Texas Appleseed, Foundation Communities, Texas Impact, and Center for Public Policy Priorities to refine the ordinance for the City of Austin. If adopted, Austin will be the second city in the state to regulate the operations of payday lending institutions.
Spelman noted, “In Austin, there are responsible small dollar lenders out there – like credit unions or innovative financial institutions – that safely provide access to short-term, emergency loans, allowing the city’s social service agencies to stay focused on improving the financial stabilty of Austin’s residents.”
But Bishop Joe Vásquez of the Catholic Diocese of Austin said predatory lenders confound the efforts of Catholic Charities and similar ministries to help those in poverty. “While we are providing $300 cash assistance to a family for food and utilities, that same family has payday loan debt on average of $455. In effect, our assistance was helping a client pay for a need such as electricity or water, so that our client could continue to pay off a payday lender. Our charitable dollars are in fact funding the profits of payday lenders rather than helping the poor achieve self-sufficiency,” said Vásquez.
Walter Moreau, Executive Director of Foundation Communities said, “We have clients who diligently visit a handful of payday lenders every two weeks, just rolling over loan after loan. They’re not making even the smallest dent in the principal amount owed. They’re just paying fees which easily add up to hundreds if not thousands of dollars over time.”
Spelman added that payday lending reform is a non-partisan issue. “This isn’t a concern of the left or the right; it’s a human concern. Fifteen states and the District of Colombia have implemented payday lending rate caps around 36% APR. Cities like Dallas, Richardson, and San Antonio are initiating local action against these small dollar lenders. Now it’s time for Austin to step up and help curb the burden unfair payday lending practices have on our residents and our community.”
The Austin City Council meeting will begin at 10:00am on Thursday August 18th at Austin City Hall, 301 West 2nd Street, Austin, TX 78701.