City council has passed a new ordinance regulating payday and title loan lenders.
San Antonio is the third city in Texas to pass this kind of ordinance; it's been done in Austin and Dallas. Today city council chambers was packed with people speaking for and against the new payday loan initiative; even the church sent some representatives to speak on its behalf.
"I don't think it is fair for people to be charged unjust interest on the loans they borrow,” Sister Ferdinand of Holy Spirit told us.
The fight to regulate payday and title loan lenders has been a long one, easily comparable to the story of David versus Goliath.
"I personally believe that without state action we have no choice but to step in because nothing else has happened and no one had done anything,” Diego Bernal, Councilman for District 1, noted during today’s meeting.
For years, consumer advocates have tried to get state legislators to pass stricter guidelines for the short-term lending industry, but have had no luck battling the industries lobbyists and deep-pocket supporters. That’s why the city finally stepped in to help customers.
“What we want is something in place in San Antonio that is reasonable, that is workable, that is fair to the consumer and to the industry,” Mayor Julian Castro explained. “And I'm confident that that's what we're passing today.”
But a spokesperson for Advance America, a short-term lending business, says this is not a decision local council members should be making.
“It's our belief that the state legislature, when they acted last session, that they basically said the appropriate regulatory framework for credit access businesses is at the state level,” Deborah Reyes said.
The industry is expected to take their fight to the state legislature in January, hoping they'll get ordinances like this repealed. Supporters say they'll be ready.
The ordinance will authorize the City to limit payday loans to 20% of the borrower’s gross monthly income; limit auto title loans to the lesser of 3% of the borrower’s gross annual income or 70% of the vehicle value; limit loans to no more than four installments or three rollovers or renewals; require the proceeds from each installment or renewal to reduce the loan principal by 25%; require that lenders provide contracts in a language that the borrower can understand; and require that lenders provide a bilingual form, provided by the city, which denotes how the loan payment and interest works, programs and agencies which can offer financial education and cash assistance to borrowers.
