This editorial was first published in The Dallas Morning News. Guest editorials don’t necessarily reflect the Denton Record-Chronicle’s opinions.
If you have ever played Whac-a-Mole in an arcade, you’ll understand that it’s a challenge to keep the payday loan industry from exploiting consumers.
In the past few years, more than 40 Texas cities representing nearly 10 million Texans passed local ordinances to regulate payday lending abuses. They did it because local city councils heard countless tragic stories of families who sought quick money for a car repair or medical bill suddenly caught in unpayable cycles of payday loan debt.
But now at least three bills in Austin would take away both the rights of cities to make these quality-of-life decisions and roll back hard-won consumer protections. These bills are bad for consumers and cities and should be defeated.
HB 3292, sponsored by Rep. Roland Gutierrez, D-San Antonio, with the support of two Republican members of the North Texas delegation, Reps. Matt Shaheen of Plano and Giovanni Capriglione of Keller, would reopen a payday lending loophole called sale-leaseback that the Legislature closed in 2001. In the 1990s, sale-leaseback agreements allowed lenders to skirt state rate and fee cap protections to allow a consumer to “sell” and then lease back an item such as a television at exorbitant rates in exchange for quick cash. Texas lawmakers saw through this fiction and defined these transactions as loans. That change improved consumer protections. Now those protections are in danger.
A second bill, HB 3899, sponsored by Rep. Drew Springer, R-Muenster, would preempt the local payday and auto title loan ordinances adopted by 45 Texas cities, including Dallas. And a third bill, HB 2847, from Rep. Craig Goldman, R-Fort Worth, is equally problematic.
HB 2847 was supposed to clean up language in an occupational licensing measure but now includes a provision that would strip local authority over payday loans and, according to consumer advocates, could limit the ability of cities to deal with massage parlors and sexually oriented businesses.
Dallas, led by former City Council member Jerry Allen, pioneered local regulation of payday businesses with a landmark ordinance in 2011 to restrict the most abusive payday lending practices, spawning a coalition of city ordinances that have withstood court challenges. Nonetheless, the payday loan industry insists that the city ordinances are overreaching, that they simply provide cash-strapped consumers with quick cash to tide them over until their next check.
Texas’ high poverty rates make this state’s poorest citizens ripe targets for payday lending abuses, trapping them in unsuspecting cycles of financial despair. Loans that carry punitive interest rates and fees multiply a person’s debts, making it harder to pay them off.
These wrong-headed bills would set up consumers to fail and would gut the authority of cities to protect their residents. Lawmakers should not be encouraging a predatory business model that will leave cities and consumers worse off.