Payday loan regulation fails in city council
LUBBOCK, TX (KCBD) – Lubbock City Council has voted 5-2 against a city ordinance that would regulate the payday loan industry.
Dozens of citizens signed up to address the Lubbock City Council at Thursday night’s meeting, encouraging the council to pass an ordinance restricting the activities of payday lenders. The meeting was standing room only.
Many citizens have spoken of “predatory” practices that “trap” borrowers in a cycle of borrowing at rates above 90 percent.
Members of West Texas Organizing Strategies encouraged the council to pass the ordinance, which was similar to ordinances in 39 other Texas cities. WTOS members also spoke of two local banks willing to provide “microcredit” that would offer borrowers an alternative.
The only citizens who spoke out against the regulation were employees of a payday loan company.
The regulation would restrict an otherwise unregulated industry as follows:
- A credit access company must apply for and obtain a certificate of registration from the city.
- A credit access company must keep complete records of all credits issued by the company for a minimum of three (3) years and make the records available to the city for inspection upon request.
- The amount of a payday loan cannot exceed 20 percent of the consumer’s gross monthly income.
- The amount of a car title loan cannot exceed 3 percent of the gross annual income of the consumer or 70 percent of the sales value of the vehicle.
- Any loan from a credit access company that provides for installment repayment may not be payable in more than four (4) installments, and the proceeds from each installment must be used to repay at least 25 percent of the principal of the loan. An extension or refinancing of installment loans is not permitted.
- Any loan from a credit access company that provides for a one-time repayment may not be refinanced or renewed more than three (3) times, and the proceeds from each refinancing or renewal must be used to repay at least 25 percent of the nominal amount of the loan.
- Any loan granted to a consumer within seven (7) days after the consumer disbursed a previous loan constitutes a refinancing or renewal.
The ordinance was drafted by Councilor Juan Chadis.
“If a person is being exploited by these lenders, it’s one too many. Ethically, it’s wrong. Morally, it’s wrong. I am all in favor of Lubbock being business-friendly with companies that are Lubbock-friendly,” Councilor Chadis said.
Councilor Karen Gibson disagreed, saying, “This is a consumer choice.”
“I don’t think it’s our job as councilors to tell our citizens how to manage their finances,” said Councilor Gibson.
“Many of you have said this is morally and ethically wrong. I can’t disagree, but that’s not what we do. We can’t legislate any moral or ethical behavior. If you really want someone to do something, you really have to be. ” talking to your state lawmakers, “said Councilor Latrelle Joy.
“For this reason I cannot support this,” said Councilor Joy.
Lubbock Mayor Dan Pope said, “If we passed something like this, how would we get it done? It’s hard for us, I would even say we don’t enforce our codes.”
“We are not in the business of enlarging this government. That is not what the citizens want from us,” said Mayor Pope.
All council members commended Councilor Chadis for his work in bringing the matter to the council. Chadis has been working with city workers and citizens on this issue since his election in June. All encouraged alternative sources of credit and additional consumer education.
The mayor had previously announced that the noise protection ordinance had been withdrawn and would be reconsidered in February.
“We learned that we need to listen better before we think about it,” said Mayor Pope.
In other matters, the council approved the construction of Phase 2 of the Northwest Drainage Project. The $ 35 million project is being funded by a zero percent interest loan from the Texas Water Development Board, which represents a savings of nearly $ 15 million over a payback period of 25 years.
The city also commissioned Lee Lewis Construction for the $ 25,000 Hazard Construction Manager to begin the bidding process for the Citizens Tower, formerly known as the Omni Building.
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