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.

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