Are they honest businesses helping people make it to their next paycheck? Or are payday and title lenders preying on the poor, trapping them in a cycle of debt? The city council will vote Thursday on an ordinance to crack down on those businesses.
Advocates for seniors say older borrowers especially need to be protected. The AARP and local church leaders gathered in front of City Hall Wednesday to urge council members to pass the ordinance.
There are about 250 store front lenders around San Antonio. Since they're classified not as banks, but as credit service organizations, they avoid limits on interest rates and fees.
One 72 year-old-woman from San Antonio, who didn't want her name used, says she borrowed $550 dollars in April. Since then she says she made monthly payments adding up to $670.
“I still owe $782. That's how much I have to pay to pay it off. I don't think that's right."
Now her daughter is having to help pay off the debt.
“It's kind of hard for elderly to understand what they're getting themselves into when they get loans like this”, her daughter says.
Many borrowers can't pay off the entire loan in two weeks, so they make a partial payment. However, it often only goes toward fees and interest.
The proposed ordinance would require that 25% of all payments go toward the principle. It would also limit payday loans to 20% of a borrower's monthly income. Title loans would be limited to 70% of a vehicle's value.
Why doesn't the ordinance just put a cap on interest and fees that can be charged? Consumer advocates say state legislators have sided with industry lobbyists and made that impossible.
”There were some provisions in the state law that passed last session that would appear to tie cities' hands with regard to regulating the fees that can be charged on these kinds of loans. So the city of San Antonio is doing the best that it can with the tools that it has”, says Anna Baddour of the group Texas Appleseed.
The trade association representing payday and title loan companies sent us this statement: "Our hope is the San Antonio City Council will consider the borrower's perspective. The ordinance as drafted significantly restricts access to credit for San Antonio consumers."