Hurst, Euless and Bedford are cracking down on what many see as predatory practices of businesses that offer payday and auto title loans to people who find themselves in a financial jam.
Recently, the three Northeast Tarrant cities joined Arlington, Dallas and Denton in adopting ordinances that require credit access businesses to register annually, keep records of loans for three years, provide a list of nonprofit consumer credit-counseling agencies and to clearly explain the terms of the loans to the consumers who apply.
The ordinances also restrict the companies from allowing customers to borrow more than 20 percent of their gross income and limiting repayment terms to four installments.
The auto title loans can’t exceed 3 percent of the borrower’s gross income or 70 percent of the car’s value.
The ordinances will take effect Jan. 1, giving the businesses enough time to train employees about the new regulations and to prepare the loan explanations for those who apply.
Hurst, Euless and Bedford officials met with representatives from faith-based organizations that oppose the lending practices, which can lead to a vicious cycle of debt. Borrowers are at risk of having their car get repossessed or having to refinance their loans multiple times if they can’t keep up with the escalating payments.
“We were approached by members of various churches who told stories of how these practices were affecting their church members who get into a vicious cycle and cannot recover without substantial support of either the church or other charitable organizations,” Euless City Manager Loretta Getchell wrote in an email.
Getchell added that the Texas Legislature has been discussing payday lending practices but there are no statewide regulations in place.
Cities have stepped up to try and protect people from what many consider to be predatory lending practices.
The ordinances were written based on a model ordinance from the Texas Municipal League.
In Hurst, there are four credit access businesses where consumers can apply for the payday loans, said Steve Bowden, executive director of economic development.
“We hope this will protect consumers more so than in the past, which was basically nothing,” he said.
Bowden said when he approached the businesses, one was receptive toward the new rules, while the others had more questions.
Hurst City Manager Clay Caruthers said the cities decided to work together because payday lenders could move to areas without the regulations.
“We are trying to put a protective arm around our citizens,” he said.
Bedford has nine payday loan businesses, while Euless has eight.
Hurst council members heard about the ordinance restricting payday lenders during a Texas Municipal League conference and asked city staff to explore getting an ordinance in place, Bowden said.
According to the Texas Municipal League’s website, approximately 38 cities across the state have put restrictions in place, and some cities, including Arlington, Watauga and Saginaw, have zoning restrictions to limit where the payday lenders can locate.
And in June, the U.S. Consumer Finance Protection Bureau proposed rules to help protect consumers from the predatory practices.
Bishop Michael Olson of the Roman Catholic Diocese of Fort Worth helped lead the effort in Arlington where restrictions took effect in January, and the bishop has also asked the Fort Worth City Council to consider a similar ordinance, but there are no plans to adopt such an ordinance at this time.
Paula Jernigan, executive director of Mission Central in Hurst, said she is glad that the cities are taking steps to limit the businesses.
“People should recognize there are risks. Banks have regulations; why shouldn’t this industry?” she said.
“People do what they have to do to keep the rent paid, food on the table and clothes on the kids.”
This report includes material from the Star-Telegram archives.